The income tax and savings

There is a happy news for all the salaried people (at last … ). Our finance minister in his budget ( I can call it an election campaign) has given some relief for salaried employees.

Effective from 2008 April, the tax slabs are changed and also there is an increase in medical insurance claim.

Upto Rs. 1.5 lakhs: No tax.
1.5 to 3 lakhs: 10%.
3 to 5 lakhs: 20%.
Above 5 lakhs: 30%.

More Smiles for women though

For women the first slab ends at Rs. 1.8 lakhs and for senior citizens, Rs. 2.25 lakhs. Applicable from the April 1 2008 to March 31 2009.
Surcharge of 10% for earnings above Rs. 10 lakhs stays.

No change in the 3% cess either.

Now if you plan properly, you can end up paying very less tax compared to last financial year.

If you make a simple calculation,

A person with 5 lakh as an annual income will straight away save 44000 Rs because of this new tax slabs.

So, if he invests 1 lakh in tax saving investements, he can save some money there also.

Additionally, you can also invest in mediclaim insurance where you can get benefits upto 35000 Rs.

Income Tax Slabs for Financial year 2008 -09

The Tax slabs for income tax has been changes effective from April 2008.

So start planning to spend the extra amount you will get from april.Yaahooooooooo

Here is breif look at the new tax slabs

Upto Rs. 1.5 lakhs: No tax.
1.5 to 3 lakhs: 10%.
3 to 5 lakhs: 20%.
Above 5 lakhs: 30%.

More Smiles for women though

For women the first slab ends at Rs. 1.8 lakhs and for senior citizens, Rs. 2.25 lakhs. Applicable from the April 1 2008 to March 31 2009.
Surcharge of 10% for earnings above Rs. 10 lakhs stays.

No change in the 3% cess either.

Savings:
1. Earn a net income (after all deductions, 80Cs etc.) of Rs. 2 lakhs and you'd save Rs. 4,000 in taxes. (4K vs. 9K)
2. For Rs. 4 lakhs, you save about Rs. 34,000 as compared to last year. (35K vs 69K)
3. For Rs. 8 lakhs, your saving is Rs. 44,000. (1.45L vs. 1.89L)
4. For Rs. 12 lakhs you save about 49K. (2.91L vs. 340L) [This has a 10% surcharge so savings are higher]

Higher incomes would save about the same - about 4K a month, approximately. Net effect of this is positive for people, and hugely positive for people earning below 5 lakhs (effectively half their taxes are saved).


Cheers