Income Tax Saving Tips: Here is a complete calculation of how a donation of Rs. 1 can save you Rs. 1200 as income tax.
Discounts are available under 87A
Taxable income above Rs 2.5 lakh is taxable under the tax slab, but if your taxable income is Rs 5 lakh or less, you will get a rebate of up to Rs 12,500 under Section 87A. That means a 5 per cent tax rebate on Rs 2.5 lakh is Rs 12,500. In this case, the effective tax on you becomes zero. However, in this case, even if you are not liable for any tax, you must file an ITR.
1, 12,500 can be taxed
It doesn’t matter if the salary is up to Rs 5 lakh, but if your taxable income is 5 lakh 1 or more then your tax will not be zero. In such a case, you will have to pay tax on the amount ranging from Rs 2.5 lakh to Rs 5 lakh 1, i.e. Rs 2,50,001. If the taxable income is more than Rs 5 lakh, you will not get exemption under 87A. This means that in such a case you will be taxed at Rs 12,500. If the taxable income is more than Rs. 5 lakhs, then all the amount above Rs. 2.5 lakhs is taxable.
How to save up to Rs. 12,500 by donating Rs
If your taxable income is more than Rs 5 lakh due to just Rs 1 and you have made all the investments, you should donate Rs 1 to the charity. This means that by donating just Rs 1, you will get a rebate under 80G and your taxable salary will be in the range of Rs 5 lakh. That way, by donating Rs 1, you can save up to Rs 12,500 in taxes.
Start planning early in the year
If you want to save your tax by donating one rupee, the most important thing is to start your tax planning from the beginning of the year. This is because you can get this benefit when you file an ITR in the same year that you donated. In such a case, if you have not planned in advance, then you will have to pay tax up to Rs. 12,500 due to salary increase of only Rs.
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