In his interim budget speech, finance minister Piyush Goyal announced an increased tax rebate which lowers your tax liability to zero if your taxable income is Rs 5 lakh or less. The minister specifically cited an example that you can still pay zero tax if you earn Rs 6.5 lakh but invest in qualified investments for tax deductions.
If you consider the value of other deductions available to you, you can come to zero tax even from a much higher income. Let’s look at how you can do it with an income of Rs 10 lakh.
The calculation above includes the use of a home loan to reduce tax liabilities. With a home loan, you can claim up to Rs 1.5 lakh under Section 80C for principal repaid and Rs 2 lakh for interest paid under Section 24B of the Income-Tax Act.
Under Section 80D, the limits are Rs 25,000 each for self and dependent parents, provided that both parties are under the age of 60. The limit can go up to Rs 50,000 for any party that is above 60. For example, if you and your parents are both above 60, you can claim Rs 50,000 each, taking the overall deduction to Rs 1 lakh.
(The writer is the CEO of bankbazaar.com)
