Income Tax Calculations

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We have all heard the phrase “Nothing is Certain As Death And Taxes”. No matter how old you grow you have to pay tax. There is no age limit for taxation. Here in India we also have an Income tax slab for the above 80 Year age group. This clearly shows that life expectancy has increased in India. Why else would they have made an Income tax slab for an age group of 80 Years? Here the major difference between human beings and animals is “Animals Have Instincts We Have Taxes”

 

Let us consider the case of Mr Manohar an 82 year old gentleman who works as a consultant. He earns INR 15 Lakhs per annum. Mr Manohar has seen the Ups and Downs of life and knows all about taxes. He is very spend thrifty and looks to save as much as he possibly can by using Income Tax Deductions .available to him. The Income Tax Slab shown below is the one that concerns him.

Income Tax Slab Rates for Male/Females For Very Senior Citizens Above 80 Years: FY 2012-2013

	Income		Tax Rate
Upto 5 Lakhs		NIL
INR 5 Lakhs – INR 10 Lakhs		20%
INR 10 Lakhs and above		30%

Here had Mr Manohar not made use of the income tax slabs available to him the calculations shown below would have applied to him
Table 1

	Heads		% of Income Tax		Income Tax
Up To INR 5.0 Lakhs		NIL		NIL
INR 5 Lakhs – INR 10 Lakhs Here we a range of 500000 To 1000000 which gives us 500000 (1000000-500000) We then calculate 20% of 500000		20%		INR 100000 (a)
INR 10 Lakhs Here Mr Manohar earns 1500000 Here we have a range of 1000000 to 1500000 which gives us 500000 We then calculate 30% of 500000		30%		INR 150000 (a)
Total				INR 100000 (a) (c)=(a)+(b)
Educational Cess		3% of total tax (250000*3%)		INR 7500 (a)
Net Tax Payable				INR 257500 (e)=(c)+(d)

These would have been the income tax rates chargeable to Mr Manohar had he not used his tax deductions

Here Mr Manohar invests a sum of INR 100000 towards Senior Citizens Saving Schemes. This is tax deductible under Section 80C.

Senior Citizens Saving Scheme Under Section 80C

·         Senior Citizens Saving Scheme is the most lucrative scheme among all small saving schemes and is meant only for senior citizens. Interest income is tax chargeable

·         Current rate of interest is 9% per annum payable quarterly

Here Mr Manohar avails tax deductions up to a sum of INR 20000 as per Section 80 D

Tax Deductions Under Section 80D

·         Here the maximum amounts available for self, spouse and dependents for mediclaim policies is INR 15000.In case of a senior citizen it is INR 20000.In case the parents of the taxpayer are senior citizens the deductions towards their medical policies is INR 20000.

Here Mr Manohar makes a donation of INR 1 Lakh towards National Defence Fund as he feels that he needs to make a contribution to the growth and development of the nation

Tax Deductions Under Section 80G

·         Here this section offers a tax deduction for donations to certain prescribed funds and charitable institutions. Here the extent of deductions is either 50% or 100% of the contribution depending on the charitable institution donated to. For certain funds the aggregate deductions are limited to 10% of the adjusted gross total income

Table 2

	Heads		Amounts
Gross Taxable Income		INR 15,00,000 (a)
Less Senior Citizens Saving Schemes Under Section 80 C		INR 1,00,000 (b)
Less Tax Deductions Under Section 80D		INR 20,000 (c)
Less Tax Deductions Under Section 80 G		INR 100000 (d) (e) = (b)+(c)+(d)=220000
Total Taxable Income		INR 12,80,000 (f)=(a)-(e)

Table 3

	Heads		% of Income Tax		Income Tax
Up To INR 5.0 Lakhs		NIL		NIL(a)
INR 5 Lakhs – INR 10 Lakhs Here we a range of 500000 to 1000000 (1000000-500000) We then calculate 20% of 500000		20%		INR 100000 (b)
INR 10 Lakhs and above Here Mr Manohar has to pay his tax on 280000 @ 30% (1280000-1000000)=280000		30%		INR 84000 (c)
Total Tax				INR 184000 (d) (d)=(b)+(c)
Education Cess		3% on Total Tax 184000 @ 3%		INR 5520
Net Tax Payable				INR 189520 (d)+(e)

·         Here we have Net Income Tax Payable INR 257500 (TABLE -1) where Mr Manohar has not done any tax deductions as per the various tax deduction instruments available to him

·         Here we have Net Tax Payable INR 189520 (TABLE – 3) where we calculate the amount Mr Manohar has saved when he made use of the tax saving instruments available to him

·         Here the difference between TABLE 3 and TABLE 1 is the yearly amount Mr Manohar has saved on tax by making use of tax saving instruments available to him. This translates to a sum of INR. 67980

I would like to end this article on a note that age, wisdom and experience play a very large part in our tax deductions. There is no age for learning and one should take the effort to do so at any age So no matter how old you are do not neglect to plan out your income tax deductions. Here we have the famous saying “A Rupee Saved Is A Rupee Earned”.

 

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