An income tax slab is a term used in India to describe the tax rates for employed professionals and businesses. There are different categories of slabs, such as those for males, females or senior citizens. However, the rates are similar and based on the individual’s earnings.
Rates
A flat 10 percent rate is charged for those individuals earning 160,001-500,000 Rupees. Twenty percent is the slab for those in the income bracket from 500,001-800,000. Thirty percent is the amount paid for those making 800,001 or more. These are increases from previous slabs in which an individual earning 500,001 or more was taxed at a rate of thirty percent.
No Tax
India also has a zero tax rate for those who qualify. To claim zero percent the male individual must have a taxable income of 1,50,000 or less; for females the limit is 1,80,000; for males and females, senior citizen exemptions are reserved for those aged 65 or older. The earnings limitations for the ten, twenty and thirty percent slabs are detailed above, but there are other considerations as well.
Surcharges, etc.
India imposes a surcharge on income taxes equivalent to about ten percent. The charge is applicable to anyone who makes more than 10 lakh. Depending on the value of the currency, this includes anyone making more than 100,000 Rupees. By these standards, most of the working class is obligated to pay this charge.
In addition to taxing taxes, India has an education ‘cess,’ equivalent to two percent of the total of the amount to be paid. The number is calculated on an individual basis, and the fee is reduced for secondary and collegiate level education. Deductions can be claimed to reduce the overall amount paid, but these charges will be levied on the final return regardless.
Deductions
Setting aside money in investments and savings can reduce the total taxable income. According to India’s taxing laws, up to 1 lakh reduction is acceptable. Several opportunities for shrinking the tax bill exist, and using more than one is advisable.
One possibility is the Public Provident fund. This is a low risk fund which allows the individual to invest a minimum of Rs. 500 and a maximum of Rs. 70,000 per year. This is only a good option for long term investment as the interest is not locked in until the fifteen year maturity date is reached.
Another deduction is through the Indian equivalent of equity mutual funds, known as ELSS. This is considered a high risk investment. These funds invest in a diverse group of stocks and do not guarantee a return. The advantage is tax free dividends after the maturity date of three years. The disadvantage is having a maturity date of three years.
National Savings Certificates are low risk savings vehicles which require minimal capital to purchase. They carry a maturity date of six years and any earned interest is taxed. Similar to the NSC’s are the low interest bank deposits. Again, these are easy to get started and earned interest is taxed as capital gains.
For the best information and advice about a particular income tax slab, always consult a professional.
Looking for Something? Search here:
(examples: auto, banking, college, credit cards, debt, frugality, insurance, investing, loans etc.)
