Income Tax Deductions and Zero/less Tax

Tax payers are confused as to which tax regime is to be selected.

Since, there are more options available, Tax planning has become pretty complex.

So, Let us discuss each and every exemptions, deductions and Tax saving investments. So that one can take maximum deduction from his taxable income and pay minimum tax.

We will discuss all the deductions, exemptions and tax saving options with the help of an example.

Let us say, A person's Annual CTC is ₹17,00,000/-

The working of the taxable Income is provided in the image with brief explanation.

Since the Taxable income is not less than ₹ 5,00,000, let us Mediclaim paid for parents 50000/- and taxable income would come down to 4,95,500/-

It is not practically possible for every one to claim all these deductions. We have tried to cover maximum deductions available to minimize Tax Liability.

Let us reduce few of the deductions and assume the Annual CTC ₹ 15,00,000/-

Deductions not claimed - Education Loan, Vehicle Loan, Children Education allowance, Hostel Allowance.

Let us check the Taxable income Now.

Here, after removing few of the deductions, Taxable income is ₹ 5,10,000/-.

To reduce it to ₹ 5,00,000/-, additional deductions required to be claimed.

Mediclaim is claimed for self, spouse and children only.

If we add Mediclaim for parents as well say ₹ 50,000/-, taxable income will be less than ₹ 5,00,000/- and zero tax would be payable on your Income.

Tax Rates for both the regimes are as follows

Now, Let us check Taxable income in New Tax Regime for the above situation.

In the New Tax Regime, Tax Rebate is given up to income of ₹ 7,00,000/-

If your Annual CTC is ₹ 15,00,000, in new tax regime, your taxable Income would be ₹ 12,85,000/-. You will have to pay tax, tax liability will not be zero.

So, as seen form the above working, if your Salary is ₹ 15,00,000, Tax would be zero in old tax regime if you have claimed maximum deductions.

We can say that if you have more deductions to claim, old tax regime is better option.

If you expect more in hand salary, you might choose New tax regime.

So, decision of choosing between both regimes is completely up to you.

You can use this calculator to check taxable income in both the regimes and select the regime more suitable to you and let us know, when the taxable income will be below ₹ 7,00,000/- in case of new tax regime in the comment?

Excel file for calculating Taxable Income is provided in the Telegram group.

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