What Are the Income Tax Slabs and How Will Mutual Funds Help You to Save Tax?
The fiscal year has ended and tax-related activities are not at the top of the priority list of most people. However, we recommend that you try a different approach for the coming fiscal year 2018-19. Start planning early to avoid end of year rush!
What are the income tax slabs in India?
The income tax rates and slabs for the current year 2018-19 are detailed below.
The tax structure for businesses is as follows:
- 25% of taxable income for businesses with turnover less than INR 5 crore
- 30% of taxable income for businesses with turnover more than INR 5 crore
- An additional surcharge on the taxable income
- 7% on taxable income between INR 1 crore to INR 10 crore
- 12% on taxable income above INR 10 crore
The personal income is taxed per the income tax slab that the individual falls under. The income tax department no longer differentiates between men and women and taxes them equally per the slab. Before you find ways on how to reduce tax, it is important to know the applicable brackets.
Income tax slabs for individuals & Hindu undivided family (HUF) under the age of 60-years
- Income up to INR 2.5 lakh is tax-exempt.
- Income more than INR 2.5 lakh and up to INR 5 lakh is taxed @ 5%.
- Income exceeding INR 5 lakh and up to INR 10 lakh is taxed @ 20%.
- Income more than INR 10 lakh is taxed @ 30%.
- A surcharge @ 10% is applicable to the income tax payable by an individual with annual income more than INR 50 lakh and less than INR 1 crore.
- A surcharge @ 15% is applicable to the income tax payable by an individual with annual income more than INR 1 crore
- A 3% cess is applicable on the total income tax payable, including the surcharge.
What are the income tax slabs for senior citizens (individuals between 60 to 80 years of age)?
- Income up to INR 3 lakh is exempt from taxes.
- Income more than INR 3 lakh and up to INR 5 lakh is taxed @ 5%.
- The rest of the slabs are the same as for individuals under the age of 60-years
What are the income tax slabs income tax slabs for super senior citizens (individuals older than 80 years)?
- Income up to INR 5 lakh is not taxable.
- Income more than INR 5 lakh is taxed as per the slabs for individuals under the age of 60-years.
The important thing about these slabs is that the taxable income considered here accounts for the exemptions under the Income Tax Act, 1961. That means if your income is INR 9 lakh and you have tax-saving investments up to INR 1.5 lakh that are eligible for exemption under Section 80C of the IT Act, then your taxable income is INR 7.5 lakh. This is assuming you have no other exemptions to claim.
The tax you would have to pay if you are under 60-years of age would be as follows:
| Income Bracket | Tax to be paid |
|---|---|
| INR 0 – INR 2.5 lakh | INR 0 (Exempt) |
| INR 2.5 lakh to INR 5 lakh | INR 12500 (5% *250000) |
| INR 5 lakh to INR 10 lakh | INR 50000 (20% * 250000) |
| Cess @ 3% on the income tax | INR 1875 (3% *(12500+50000)) |
| Total Tax payment | INR 64375 |
What are tax Saving Investments?
Several tax-saving investments listed under Section 80C help you to reduce your taxable income. These include, but are not limited to, Public Provident Fund (PPF), National Pension System (NPS), Equity-Linked Savings Schemes (ELSS), fixed deposits (FDs), life insurance, and health insurance.
Off all the investments that are tax exempt, ELSS funds are the most lucrative as they come with the shortest lock-in period, and have a better earning potential than PPF and NPS. In addition, the interest earned on FDs is taxable. However, the earnings and maturity proceeds on ELSS funds are tax exempt, once you have stayed invested for the lock-in period.
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Now that you have a clearer understanding of the income tax slabs, you would have a better idea on how to reduce tax payments by investing right. With Angel Bee at your service, go ahead, download our app and start investing to save tax!
