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How to know in which income tax slab you fall?

As your income level increases, income at different levels will be taxed at different rates which are called the slab rates. To know how much is your tax liability in FY 2019-20, it is very important to know which income tax slab you fall in.
How to know in which income tax slab you fall?

While doing your tax planning for FY2019-20, it is very important to know which tax slab your income falls in. The slab rate in which your income will fall is the rate at which your income will be taxed.

As your income level increases, income at different levels will be taxed at different rates which are called the slab rates.
*Income tax slabs applicable to the resident individuals below the age of 60 years for FY2019-20. Surcharge is applicable from income above Rs 50 lacs. Health and Education cess at rate of 4% will be added to the income tax payable in all cases. Rebate of Rs 12,500 is available for an individual having net taxable income of up to Rs 5 lacs under section 87A.

Suppose your gross total income is Rs 15 lacs in FY2019-20, the first Rs 2.5 lacs from your income of Rs 15 lacs will be exempted from tax. This is because as per current income tax rates, there is no tax on income up to Rs 2.5 lacs.

Post this; the income left in your hands (Rs 15 lacs - Rs 2.5 lacs) which is still chargeable to tax is Rs 12.5 lacs, the next Rs 2.5 lacs (i.e., Rs 5 lacs minus the Rs 2.5 lacs which is tax exempt) will be taxed at 5 per cent. Therefore, at this stage, your income tax liability will be Rs 12, 500 (5 per cent of Rs 2.5 lacs).

The income which is still chargeable to tax is Rs 10 lacs (Rs 12.5 lacs minus Rs 2.5 lacs which is taxed at 5%), out of Rs 10 lacs, the next Rs 5 lacs (i.e. Rs 10 lacs minus Rs 5 lacs) of your income will be taxed at the rate of 20 per cent. The tax liability here comes out to be Rs 1 lacs (20 per cent of Rs 5 lacs).

At this stage, your total tax liability will become Rs 1,12,500 (Rs 1 lacs plus Rs 12, 500). However, remember you income still needs to be taxed at the last rupee. Thus, out of gross total income of Rs 15 lacs, income up to Rs 10 lacs is only offered to tax. The income which is now left chargeable to tax is Rs 5 lacs (Rs 15 lacs minus Rs 10 lacs).

Infact, any income above Rs 10 lacs will be taxed at 30 per cent. There will also be a surcharge on income tax applied at different levels of income when the income exceeds Rs 50 lacs.

From point mentioned in the example above, your total income tax liability comes to be Rs 2,62,500. The cess at the rate of 4 per cent will be added to your total income tax liability i.e. Rs 2,62,500. The cess amount would be Rs 10,500 (4 per cent of Rs 2,62,500).
The final net tax liability payable by you will be Rs 2,73,000 (inclusive of cess).

How to lower the tax outgo:

Under the Income-tax Act, 1961, various tax exemptions and deductions are available that can help an individual tax payer lower his tax outgo. These include: tax exemption on house rent allowance (HRA), leave travel allowance, interest received from post office savings account etc. Similarly, individuals can claim maximum deduction of Rs 1.5 lacs under section 80C by investing in specified tax-saving 

Premium paid on health insurance for yourself, family and parents can help you save tax under section 80D and deduction of up to Rs 10,000 can also be claimed under section 80TTA (by individuals less than 60 years old) on interest received in savings account held with bank and/or post office.
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