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Zero Tax on Salary of Rs. 10,00,000? Is it possible?

Zero Tax on Salary of Rs. 10,00,000? Is it possible?

Yes, even if your salary is up to Rs. 10,50,000, you will not be required to pay the taxes after reading this article.

1. Standard Deduction

⦁ Assumption – Salary Considered – Rs. 10,50,000. If even if it is less, you can still save the taxes to zero and yes, you heard it right – Legally, without having the sleepless nights of getting notices from the Income Tax Department.

⦁ the government provides the Standard Deduction of Rs. 50,000. So your taxable salary is Rs. 10,50,000 – 50,000 = Rs. 10,00,000.

2. Deduction under Section 80C. Confused about what comes under 80C – Read Below –

⦁ PPF, EPF, LIC premium, Equity-linked saving scheme, principal amount payment towards home loan, stamp duty and registration charges for the purchase of property, Sukanya Samriddhi Yojana (SSY), National saving certificate (NSC), Senior citizen savings scheme (SCSS), ULIP, tax saving FD for 5 years, Infrastructure bonds, etc.

⦁ The maximum deduction which can be claimed here is Rs. 1,50,000. Hence, considering you invest Rs. 1,50,000, your taxable salary becomes – Rs. 10,00,000 – Rs. 1,50,000 = Rs. 8,50,000 (taxable salary).

3. Deduction under Section 80CCD (1b) – National Pension Scheme –

⦁ You can claim a deduction of Rs. 50,000 by investing under NPS. Yes, it has restrictions for the withdrawal, but this will help you in building a retirement corpus.

⦁ The taxable salary after investing here will become – Rs. 8,50,000 – Rs. 50,000 = Rs. 8,00,000.

4. Deduction Under Section 80D – Medical Insurance –

⦁ Indians, yes you heard it right we Indians have started giving importance to Insurance policies and yes now we don’t ask ” Wapas Kitna Milega Kuch Nahi Hua To” – With this change in mindset and living in a pollutive environment we require medical insurance. “Sone pe Suhaga” is it will even save your taxes.

  • ⦁ For self, spouse & children – There is a cap of Rs. 25,000 or 50,000 (in case of senior citizen)
  • ⦁ For Parents – There is a cap of Rs. 25,000 or 50,000 (in case of senior citizen)
  • ⦁ Even body checkups are allowed and a deduction up to Rs. 5,000 can be claimed. But the upper limit is mentioned above.
  • ⦁ If your parents are senior citizens, and they don’t have medical insurance and they aren’t filing their Income Tax Return and if you paid for their medical treatment, you can claim up to Rs. 50,000.
  • ⦁ Hence, after section 80D, the taxable salary shall become – Rs. 8,00,000 – Rs. 25,000 = Rs. 7,75,000.

5. Interest on Housing Loan – Section 24b of Income Tax Act –

⦁ We Indians grow up hearing “Apna Ghar Apna Hi Hota Hai” and our minds start thinking about it as soon as we start family planning.

⦁ Interest on housing loans is allowed till Rs. 2,00,000 every financial year. Hence, your taxable salary becomes – Rs. 7,75,000 – Rs. 2,00,000 = Rs. 5,75,000.

6. Interest on Education Loan / Purchase of Electric Vehicle / Donation Under Section 80G —

⦁ Education has become very costly and middle-class parent cannot afford to pay from their pocket, hence education loan is taken by the number of students. The interest component of the loan is deductible under section 80E.

⦁ The world is shifting from Petrol/ Diesel to EVs and yes, you can even claim a deduction of up to Rs. 1,50,000 on interest paid for the purchase of EVs. The deduction is available u/s 80EEB. (Vehicle should be financed, notional interest cannot be claimed).

⦁ If none of the above is applicable, then donations are also allowed as deductions. Provided you are donating to charitable trust or NGOs which has got the certificate from Income Tax.

⦁ Now the overall objective is to reduce the taxable income from Rs. 5,75,000 to Rs. 5,00,000. Considering Rs. 75,000 deductions are claimed by using the above section. Then you need to pay zero taxes. Confused? Happy? How How? Let us see –

⦁ Now the Taxable salary is Rs. 5,00,000. The tax on income up to Rs. 2,50,000 is exempt from tax. Thus the tax payable would be Rs. 12,500 (5% slab from Rs. 2,50,000 to Rs. 5,00,000. Hence 5% of Rs. 2,50,000 is Rs. 12,500).

7. Rebate under section 87A –

⦁ If your income is Rs. 5,00,000 or lesser, you can claim a rebate under section 87A for a maximum of Rs. 12,500. Hurrah the tax payable is Rs. 12,500 (tax calculated above) – Rs. 12,500 (rebate u/s 87A) = 0 (Zero).

“Start Planning, you can thank us later 🙂“

⦁ Upcoming article – How to pay zero taxes on Rs. 20,00,000 salary. Stay tuned.

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Update on Banking Sector, positive for banking stocks –

Banks for the 1st time in the last three years have seen their December loan growth outpacing the January growth rate. But, it continues to be in a single-digit for the last three calendar years.

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Attention: File GSTR-9 & 9C before 31/12/2021 to avoid Late fees.

Applicability of GSTR 9 & 9C –

⦁ GSTR-9 is optional for taxpayers with a turnover of up to Rs.2 crore.

⦁ GSTR-9 is required to be compulsorily filled by the taxpayers with a turnover of more than Rs.2 crore but less than or equal to Rs.5 crore for the FY 2020-21.

⦁ Taxpayers with a turnover exceeding Rs. 5 crores in the previous financial year are required to file Form GSTR-9 & 9C on a self-certification basis compulsorily by 31st Dec 2021.

Note – Verification table by CA/CMA in Part B of Form GSTR-9C has been deleted. Now, only verification by the registered person is required in GSTR-9C for applicable registered taxpayers. This change applies from FY-2020-21 onwards.

Consequences of not filing GSTR 9 and 9C before 31st December 2021 –

A registered person failing to furnish the GSTR-9 by the due date shall be liable to pay a late fee of INR 200 (INR 100 for CGST and SGST each) every day during which such failure continues subject to a maximum of an amount calculated at a half percent of his turnover in the State or Union territory. Further, while calculating maximum late fee, ‘turnover in State’ or ‘turnover in Union territory’ should be taken into consideration.

What are the things which need to be kept in mind GSTR-9 & 9C return before 31st December 2021?

⦁ The taxpayer would have the “option” to report taxable outward supplies net of debit and credit notes and amendments made under table 4A to 4G in GSTR-9 instead of reporting separately under table 4I to 4L.

⦁ The taxpayer is mandatorily required to report values of Export (5A) and SEZ (5B) supplies without payment of tax, supplies on which tax is to be paid by the recipient on a reverse charge basis (5C) separately.

⦁ The taxpayer would have the “option” to report exempt (5D), Nil rated (5E), Non-GST (5F) supplies cumulatively under table 5D if bifurcation of such supplies is not available.

⦁ The taxpayer would have the “option” to report taxable outward supplies net of debit and credit notes and amendments made under table 5A to 5F in GSTR-9 instead of reporting separately under table 5H to 5K.

⦁ The taxpayer is mandatorily required to report the details of ITC on capital goods separately. However, details of ITC on inputs and input services can be reported on a merged basis under the head ‘Inputs’ under Tables 6B & 6E.

⦁ The taxpayer would have the “option” to report the details of ITC on capital goods separately. However, details of ITC on inputs and input services can be reported on a merged basis under the head ‘Inputs’ under table 6C. Further, the details of Table 6C can be reported on a merged basis in Table 6D.

⦁ The taxpayer would have the “option” to report the accumulated amount of reversal from 7A to 7E can be filled in 7H, i.e., in ‘Other reversal’, but the reversal of transitional credit fields is mandatory.

⦁ Ideally, the value of Table 8D should be positive & if it is positive, then the total of 8E and 8F shall be equal to 8D.

⦁ Further other details of refund claimed during the year including sanctioned, rejected, or the pending amount & HSN Wise Summary of outward supplies and HSN Wise Summary of Inward supplies are optional.

Disclaimer – The above information is just a view of the author and should not be taken as legal advice. For Information and Education Purpose.

Contact us in case you need any services related to GST Consultation, GST Advisory, GST Registration Services, GST Returns or compliances, GST Notices and Assessments, GST Demand, GST Annual Return.

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