Reeling under the effects of the pandemic and lockdowns, taxpayers have a lot of expectations from the upcoming Union Budget 2022-23. One popular demand is to raise the basic exemption limit from the current Rs 2.5 lakh. Taxpayers have also urged the Finance Ministry to raise the current standard deduction limit from Rs 50,000 to at least Rs 1 lakh.

Many also hope that Finance Minister will rejig tax slabs to lower their tax burden, although this demand seems far fetched. The development, if it occurs, will indeed be cherished by taxpayers. But even if it doesn’t there are plenty of provisions in existing tax laws, which if adequately utilised, can significantly reduce the tax burden.

Even those who earn a healthy Rs 10 lakh per annum can plan for zero taxes. Assuming a person who has Rs 10 lakh per annum in salary income and Rs 20,000 in interest income. Right off the bat, the yearly income will be reduced to Rs 9.7 lakh taxable income due to the standard deduction.

The tax-saving investments under Section 80C can further reduce taxable income by up to Rs 1.50 lakh. Another Rs 50,000 can be saved by investments in the National Pension Scheme under Section 80CCD(1b). These two deductions will bring the taxable income down to Rs 7.7 lakh per annum. Home loan deduction, if any, can potentially shave off another significant chunk from the taxable income.

Assuming home loan or House Rent Allowance (HRA) will further reduce the taxable income by Rs 2 lakh, the effective taxable income now comes down to Rs 5.7 lakh. Medical insurance, which has become especially important after Covid, can lower the taxable income by another Rs 25,000. A taxpayer may separately claim another Rs 50,000 paid for insurance of elderly parents. After claiming both these deductions, the taxable income will come down to Rs 4.95 lakh.

Once the taxable income comes below Rs 5 lakh, it will not be taxed as it is eligible for full rebate under Section 87A. After using all of these deduction, a taxpayer with Rs 10 lakh per annum can effectively reduce his tax liability to nil.

Source: https://www.timesnownews.com/business-economy/personal-finance/article/how-to-pay-zero-tax-on-annual-income-of-rs-10-lakh-details-here/850342