How to pay zero tax for income upto 12 lakhs?

Even the billions save taxes and save money than why not you? Even Warren Buffett, Bill Gates and Mark Zuckerberg pay Income taxes that are only a tiny fraction of there income

Middle class people usually shy away from tax planning, but it is the most important topic that can save us a lot by just understanding the simple concepts of tax planning. I will teach you in very simple language how it works until 12 lack of income, you don’t need to give a single penny on tax. This will understand by simple example, Take note pad and pen to understand the basic concept,

Suppose your monthly income is one lakh, so for the current fiscal year your income will be 1 lakh X 12 = 12 lakh, now according to income tax law any annual income over 5 lakh is taxable, which means up to 5 lakh you don’t need to pay income tax, but the government has given lots of exemptions to taxpayers to reduce their tax burden because even one penny of your hard work is important.

Now we will continue with our example, not all given exemptions may apply to you, but if you want to save income tax take as many as you can.

Let us take an example

Total Income for current financial year is 12 Lac.

Total Taxable income is 12 lac- 5 Lac = 7 Lac

First of all, you can claim the standard deduction of Rs 50,000 available for the current fiscal year. 

Income from house property Deduction under section 24(b) on account of interest on capital borrowed for the purchase, construction, repair, renewal, or reconstruction of the property. However, in the case of a self-occupied property, the limit is Rs. 2,00,000 or Rs. 30,000, as the case may be.

1. Section 80 C: The aggregate amount of deductions allowed under section 80C is INR 1,50,000. The deductions under section 80C are allowed only to the following assesses: –

Life insurance premium

Premium payed on Sukanya samriddhi Yojana

Public provident fund

Equity-linked saving scheme

Five-year bank deposit

Stamp duty and registration charges

Senior Citizen saving Scheme

National saving certificate

Home loan principal repayment

Children’s school tuition fees.

2. Section 80CCD: It allows salaried individuals to claim deductions up to 10% of their salary which includes the basic pay and dearness allowance or is equal to the contributions made by the employer towards the NPS.

3. Section 80 D: This Act provides tax deductions for medical expenditure made for the self and the family, It includes Self, spouse, children, parents, and Hindu Undivided Families (HUF) can claim this.

Health insurance premium for you, your wife, children up to 25000

Health insurance premium for your parents under 60 years 25000

Your parents more than 60-year 50000

Preventive health checkup 5000.

4. Section 80DD: It is the deduction for the medical treatment of a handicapped dependent, who is a person with a disability. Medical treatment for handicap for you, wife, child, parents, brother, sister up to 1.25Lac.

5. Section 80DDB: An individual can claim for deduction for incurring medical expenditure either for self or for a family dependent. Under Section 80DDB, an individual can claim a deduction of up to Rs 40,000. If an individual on behalf of whom such medical expenditure is incurred is a senior citizen, then one can claim for deduction up to Rs 1,00,000 per annum.

6. Section 80 EEA: A deduction for interest payments up to Rs 1,50,000 is available under Section 80EEA.

This deduction is in addition to the deduction of Rs 2 lakh for interest payments available under section 24 of the Income Tax Act. Therefore, taxpayers can claim a total deduction of Rs 3.5L for interest on a home loan, if they meet the conditions of section 80EEA.

7. Section 80E: It covers the deduction on the “interest component” paid on higher education loans from notified financial or charitable institutions. Interest paid on education loans taken for higher studies of self, spouse, or children (including for whom you are the legal guardian) can be claimed as a deduction from the taxable income.

8. Section 80G: If Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. All donations, however, are not eligible for deductions under section 80G.

9. Section 80TTA: Income Tax Act allows you to claim deductions on savings accounts deposits that are held in a post office, bank, or cooperative society. Exemption sought should be less than Rs.10,000

Below table shows how we calculate income tax

How to save income tax till 12 Lack income
Income tax SectionsTax section detailsStandard
Total Income 1200000
Taxable incomeTotal income – 5000001100000
Standard deduction by Govt. 50000
Section 24Interest payed on Home loan200000
Section 80CHome loan principal amount, LIC, PPF, Sukanya, child tuition fees etc.150000
Section 80CCDNational pension scheme (NPS)50000
Section 80DHealth insurance Self25000
Health insurance Parents up to 60 age (25000)/More than 60 age (50000)50000 
Preventive health checkup self & family5000 
Section 80DDMedical treatment handicap125000
Section 80DDBMedical treatment Specific disease40000
Section 80EEAAdditional Repayment of Home loan interest first timer150000
Section 80EInterest payed on Education loan (If 5 lack @10%)150000
Section 80GDonation given 100% to Govt Scheme,50% to others95000
Section 80TTAInterest on Saving account interest income10000
Total Deduction 1100000
Government rebate for income tax 500000
Total Taxable income 0

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