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