Tax Saving Schemes

“Tax”, this word can give one sleepless night when the time to pay the taxes are up and the appropriate savings are not done to enjoy the tax benefits. Taxes saving schemes come off as saviors under such circumstances. For people who come under taxable income, to calculate payable tax, slab rates of the current year given by the Indian Budget are used. Based on these rates, the payable tax as per the category the person falls into is calculated. Of this payable income, a particular percentage is slotted for savings. If this savings are conducive with the tax deduction clauses than the amount saved can be deducted from the sum total of the payable tax.

As per the slab rates given by the Indian Budget for the year 2010-2011, the tax rates are categorized as male (below 65), female (below 65) and senior citizens. For male below 65 years, tax rates are as follows: Income up to Rs 160,000 which is the basic exemption limit the tax rate is nil, from 160,000 up to 300,000 its 10%, from 300,000- 500,000 its 20% and above 500000 its 30%. For women below 65, income up to 190,000 tax rate is nil, from 190,000 up to 300,000 its 10%, 300,000-500,000 its 20% and above 500,000 its 30%. For senior citizens, the basic exemption limit is Rs 240,000, tax rate for income from 240,000 – 300,000 is 10%, from 300,000 – 500,000 is 20% and above 500000 is 30%.

As per the above stated categories, every category is entitled to a certain amount as saving. For example, if the amount that can be saved per annum is 100,000 than this amount can be deducted from the taxable income provided the savings are as per the tax deduction clauses. As per Indian Budget 2010-2011, the section 80C deductions have been relaxed, if the tax deduction is with respect to life insurance premiums, the deduction sum is limited to 200,000 and the deduction is applicable only if the premiums are paid, if the contribution is in the for of public provident fund or contribution to some national saving schemes. Under section 80D Medical insurance policies are included. Home loans and education loans are also included in the deductions if the necessary terms and conditions are fulfilled.

One can save tax by deductions made on investments. These investments include investments with monthly income scheme of the post office, savings in bond, mutual funds, with banking institutions, authorities working for planning and development of cities etc. There are few incomes which are exempted from tax deductions for example agricultural income, profits shared by partners etc. Once tax planning is well executed, the tax deductions can be rightly filed.

Tax benefit can be considered as another tax saving scheme which allows the tax payer a deduction on tax on the basis of the benefit of some other entity. For example a tax payer can opt for energy tax credits which are applicable when the tax payer chooses to use energy efficient systems in his home and this benefits the environment (another entity) by reducing the demand of fuel.

With so many options available, sleepless nights can be avoided by choosing the right tax saving schemes after a thorough knowledge of what kind of savings help to reduce tax liabilities. Since taxes are paid on a yearly basis, tax planning becomes an important criterion in the process of saving the huge amount that a person is entitled to.

For more information please visit – Tax saving structure