Income tax you pay depends on how much you make in a year. An investment of Rs.1,50,000 under Section 80C can bring down taxes considerably — so much that it could move you down one income tax slab. This means that you may have to pay only 10% tax instead of 20%.
Here’s an example: Anjali has been in the workforce for a couple of years now but never cared very much about income taxes or tax planning. She makes about Rs.5,50,000 per annum and has invested some money in tax-saving mutual fund ELSS and PPF upon her father’s suggestions.
Anjali thought there wasn’t much to save and didn’t bother about taxed until she heard of Section 80C. Anjali decided to take the matter in her own hands and she sat down to understand about taxes, she was surprised to learn that taxes were not such a big deal at all.
She quickly figured that with proper tax planning, she could considerably save up on her taxes.
|Anjali’s taxes without Sec 80C investments||Anjali’s taxes with Section 80C investments|
|Gross income||Rs.5,50,000||Gross income||Rs.5,50,000|
|Deductions u/s 80C||NIL||Deductions u/s 80C|
|Anjali’s contribution to PF||Rs.36,000|
|Investment in PPF||Rs.36,000|
|Investment in ELSS||Rs.20,000|
|Taxable salary||Rs. 5,50,000||Taxable salary||Rs.4,58,000|
|Gross tax||Rs.36,050||Gross tax||Rs.19,364|
Anjali has almost halved her taxes with investments under Section 80C. Find out how the Section 80C deductions play out with our income tax calculator.
Wondering how to choose a tax-saving investment under Section 80C? That’s on tomorrow’s blog post. If you have any questions, write to us firstname.lastname@example.org