How you can save Rs.7210 of Income Tax by investing Rs.10000

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Is TDS eating up your salary and you feel that you get less in hand salary? You would be already aware about the various tax saving instruments (like Deductions Section 80C, 80D or deduction of housing loan interest) but do you know you can save more tax with the a little more investment (if you are already investing) with the help of rebate under section 87A of Income Tax Act. If your Total salary (after deductions) is Rs.510,000, you can save Rs.7210 by investing just Rs.10,000. In case your salary is just Rs.2000 above Rs.5 lacs you can save Rs.5562 by investing just Rs.2000.

Tax-SavingIf you salary is slightly above Rs.5 lacs, you can take benefit of rebate under section 87A. Tax Rebate of Rs.5000 is available if your taxable income is upto Rs.5 lacs.  Have a look on your income tax calculations and see if you can take benefit of rebate under section 87A and save more tax by a little investment. You can claim deduction under section 80C upto Rs.150,000 and additional deduction of Rs.50,000 under section 80CCD(1B).

You may sometime observe that with increase in your salary (say Rs.1000 per month due to increase in dearness allowance) your TDS have increased by Rs.500 (assumed), this may be due to the effect of rebate of section 87A, which was earlier available to you when your total income was less than Rs.5 lacs, but it there is scope for investment, you must invest the extra amount to save additional tax and claim rebate.

The following table shows how much you can save by a little additional investment.

Total Income 502,000 510,000 525,000 550,000
Income Tax 26,162 27,810 30,900 36,050
 Additional Investment 2,000 10,000 25,000 50,000
 Revised Total Income
(after additional investment)
500,000 500,000 500,000 500,000
 Revised Tax      20,600 20,600 20,600 20,600
 Tax Saving 5,562 7,210 10,300 15,450
 Return on Investment (by way of tax saving) 278.10% 72.10% 41.20% 30.90%
 PPF Interest 162 810 2,025 4,050
 Total Saving 5,724 8,020 12,325 19,500
 Total Saving (%) 286.20% 80.20% 49.30% 39.00%

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