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One has surely heard the famous saying "With Age Comes Wisdom " .Experience is a great teacher. More the number of times one files those income tax returns more is one's understanding of the subject. One has heard the famous saying "Knowledge Is Like A Well Which Never Dries Up ". One still has to fill one's pot with the water from this well. What can a person know in his old age if he does not fill himself with knowledge in his youth? Always invest in knowledge. It will definitely come to use at some point of time or the other. Interested in updating your knowledge on Income Taxes.

 

Individual Who Is Between 60-80 Years of Age At Any Time During The Previous Year (Financial Year 2013-2014)

Income Tax Slabs

Income Tax Rates

Education Cess

1

Where the total income does not exceed INR 2,50,000

NIL

NIL

2

Where the total income exceeds INR 2,50,000 but does not exceed INR 5,00,000

10% of amount by which the total income exceeds INR 2,50,000.

2 % of Income Tax

3

Where the total income exceeds INR 5,00,000 but does not exceed INR 10,00,000

INR 25000/- + 20% of the amount by which the total income exceeds INR 5, 00,000.

2 % of Income Tax

4

Where the total income exceeds INR 10,00,000

INR 125000/- + 30% of the amount by which the total income exceeds INR 10,00,000

2 % of Income Tax

Education Cess :
Here Education cess on Income tax and Secondary and Higher Education cess on income tax shall be levied at the rate of 2% and 1% respectively.

Let us consider Mr Harish an Elderly 62 year old gentleman earns INR 14 Lakhs per annum working as a health and nutrition consultant. He believes " One Cannot Teach An Old Dog New Tricks ". Mr Harish pays his income taxes on time but does not make use of the income tax deductions available to him. One can calculate Mr Harish's income tax paid in the following manner as shown below.

 

Table 1:

Heads

% Of Income Tax

Income Tax

Up To INR 2.5 Lakhs

NIL

NIL

INR 2.5 Lakhs – INR 5 Lakhs

Here you have a range of 250000 To 500000 which gives us 250000

You then calculate 10% of INR 250000

10%

INR 25000 (A)

INR 5 Lakhs – INR 10 Lakhs

Here you have a range of 500000 To 1000000
which gives us 500000 (1000000-500000)

You then calculate 20% of 500000

20%

+

INR 25000

INR 100000 (B)

INR 10 Lakhs

Here Mr Harish earns INR 1400000
Here you have a range of 1000000 to 1400000 which gives us 400000

You then calculate 30% of INR 400000

30%

+

INR 100000

INR 120000 (C)

Total

INR 245000 (A) +(B) + (C)

Educational Cess

3 % Of INR 245000

INR 7350 (D)

Net Tax Payable

INR 252350 (A+B+C+D)

 

What Do You Infer From This Case?

One can understand that Mr Harish through his reluctance to update his knowledge and study the income tax deductions available to him pays an extra amount as income tax. How much can he save using the deductions available to him ….Care to find out? Let's march ahead. Mr Harish can avail of the deductions under Section 80 C using the Senior Citizens Saving Scheme. He can claim deductions up to a sum of INR 1 Lakh.

Deductions under the Section 80 C of the Income Tax Act

Senior Citizens Saving Scheme

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.

Mr Harish can avail deductions up to a sum of INR 20000 if he makes use of the deductions available to him under the Section 80 D of the income tax act.

Section 80 D

Under this section, an individual can claim deductions for the health insurance premium paid for himself, spouse and children. He can also claim a deduction up to INR 15,000 for the health insurance premium paid for his parents. If either of the parents are senior citizens, this limit is INR 20,000.The age limit for senior citizen is 60 years from the Financial Year 2012-13. So, the limit can go up to INR 35,000 in a year.

Mr Harish has a disabled brother dependent on him and he can claim a deduction under Section 80 DDB up to an amount of INR 60000 by virtue of being a senior citizen.

 

Section 80DDB

This deduction is available with respect to the medical treatment of a specified disease or ailment as prescribed by the Government. Section 80DDB deductions are available for the expenditure incurred with respect to the assessee himself or his dependent spouse, children, parents, brothers or sisters. The eligibility for deduction in this Section 80 DDB is the actual expenses subject to a maximum of INR 40,000.The limit is INR 60,000 in the case of senior citizens.

Mr Harish avails a deduction under Section 80 TTA. This is because he has a Savings Bank account and he can claim deductions on the interest portion of these Savings Bank account up to an amount of INR 10000.

 

Section 80 TTA

Deduction from Gross Total Income of an individual or HUF, up to a maximum of INR 10000 with respect to interest on deposits in a savings account of a bank or a post office are allowed

 

Heads

Amount

Gross Taxable Income

INR 1400000 (A)

Less Senior Citizens Saving Schemes Under Section 80 C

INR 100000 (B)

Less Tax Deductions Under Section 80D

INR 20000 (C)

Less Tax Deductions Under Section 80DDB

INR 60000 (D)

Less Tax Deductions Under Section 80 TTA

INR 10000 (E)

Total Taxable Income

INR 1210000 (A)-(B+C+D+E)

Table 3

Heads

% Of Income Tax

Income Tax

Up To INR 2.5 Lakhs

NIL

NIL (A)

INR 2.5 Lakhs – INR 5 Lakhs

Here you have a range of 250000 To 500000 which gives us 250000

You then calculate 10% of INR 250000

10%

INR 25000 (B)

INR 5 Lakhs – INR 10 Lakhs

Here you have a range of 500000 To 1000000
which gives us 500000 (1000000-500000)

You then calculate 20% of 500000

20%

+

INR 25000

INR 100000 (C)

INR 10 Lakhs

Here Mr Harish has to pay tax on INR 1210000

Here you have a range of 1000000 to 1210000 which gives us 210000.

You then calculate 30% of INR 210000

30%

+

INR 125000

INR 63000 (D)

Total Tax

INR 188000 (A)+(B)+(C)+(D)

Education Cess

3% Of INR 188000

INR 5640 (E)

Net Tax Payable

INR 193640 (A)+(B)+(C)+(D)+(E)

 

·         Here one can see the Net Income Tax payable of INR 252350 (Table -1) where Mr Harish has not made use of any of the income tax deductions available to him and hence pays a higher amount of tax.

·         Here one can see the Net Income Tax Payable of INR 193640 (TABLE – 3) where one can calculate the amount paid by Mr Harish as income taxes had he made use of the deductions available to him.

·         Here the difference between TABLE 3 and TABLE 1 is the yearly amount Mr Harish could has saved on tax had he made use of the tax saving instruments available to him. This translates to a sum of INR 252350 – INR 193640 = INR 58710.

I would like to end this article with the famous saying "If Your Ship Doesn't Come In Swim Out To Meet It ". This saying shows that one needs to be proactive in order to meet ones goals and targets and if one wants one wants to achieve success one has to chase after it. This is highly recommended when it comes to income taxes.

 

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