Tax Planning (for Individual)
Tax planning is necessary, because it enables the Tax payer assess his/her financial position and how, he/she should efficiently plan the finances so that there is minimal tax liability without doing anything illegal. It should always be kept in mind that tax planning should be done without indulging into any kind of Tax evasion or Tax avoidance. Tax planning if done within the defined framework is known as Smart Planning. There are various ways through which the taxpayer can minimise tax burden. Most of these schemes are being announced by the Government from time to time. The main objectives of tax planning are:
Different categories of people need to plan their tax according to their requirements/ profession. Almost everybody comes under one the below mentioned categories:
For computing Total income from various sources, the incomes are classified into:
This gives an aggregate income. All the eligible deductions, allowances and reliefs are calculated under each heads.
Gross Total Income = (A+B+C+D+E)
Total Taxable Income = Gross Total Income- Deductions allowed from income
Total Tax Payable = Tax on Total Income- Rebates and relief allowed under Income Tax Act.
The tax rate is based on the income slab that the person falls under. The entire taxable income is then divided into the following parts.
(These are the prevailing rates at which tax will be calculated for the year 2015- 2016. It may change on annual basis after annual budget announcements.)
1. For an individual who is less than 60 years of age; total taxable income:
2. For an individual above 60 years but less than 80 years; total taxable income:
3. For individual above 80 years of age; the taxable income:
In addition to these tax rates, a surcharge of 2% plus 1%education cess is charged on the total tax.
Some salient points that must be kept in mind while computing Income tax are:
N.B.: Please be informed that to take the tax benefit, one has to pay the premium first.
To know more about Tax Computation of Salaried Class Click to see
To know more about Tax Computation for Self Employed Click to see
To know more about Tax Computation of Farmers Category Click to see
To know more about Tax Computation for Retired People Click to see