It’s that time of the year when you have to review your investments in order to save taxes. But, are you getting enough tax benefit against your investment options? Read on to know more about tax slabs and available investment plans.
In India, the beginning of a new year is important for taxpayers in terms of tax filing. It is the period when you engage in reviewing your investments to gain maximum tax benefits. Just like any tax-saving person, you may have also chosen certain investment options to suit your goals and risk profile. But the question is, does your investment plan reap benefits from the current tax slabs?
If no, then first, you need to have a basic understanding of the income tax slabs. Then, the next step would be to build a portfolio that is tailored to your taxability.
Below is the income tax slab table that shows tax rates for three age group categories:
|Applicable Tax rate||Individual taxpayer
(Below 60 years)
|Senior Citizen (61-80 years||Super Senior Citizen (Above 80 Years)|
|NA||Rs. 2.5 lacs||Rs. 2.5 lacs||Rs. 2.5 lacs|
|5%||Between 2.5 – 5 lacs||Between 3 – 5 lacs||NA|
|20%||Between 5 – 10 lacs||Between 5 – 10 lacs||Between 5 – 10 lacs|
|30%||Above 10 lacs||Above 10 lacs||Above 10 Lacs|
Note that 4% of education and Cess applies to all taxpayers.
Now that you know the income tax slab rates for the different age group, here are the investment options available for the respective groups:
- Single Individuals: People in this age group can make investments in life insurance, health insurance and unit-linked insurance plan (ULIP). Individuals who have an education loan can avail tax benefits under section 80E of the IT act. Having life insurance is crucial if you’re single with no dependents. Under Section 80C, a life insurance policy can help you save up to Rs. 1.5 lakh in a year. Along with this, you can choose to secure yourself with health insurance, wherein you can claim deductions up to Rs. 25,000 under Section 80D.
- Married Individuals: You can save taxes by investing in health insurance that covers self, spouse and child. This is also the phase when you might take a home loan. To get more tax benefit, you can think of term insurance. Combining all of the above investments, you can claim deductions up to Rs. 1 lakh based on your tax slab. If you still think you’re shelling out more taxes, then you can initiate a National Pension Scheme (NPS) that allows you to claim tax benefit up to Rs. 50,000 in a year under subsection 80CCD (1B).
- Individuals close to retirement: When you’re about to reach the retirement phase, you are almost close to repaying your debts and have investment options pretty much in place. If you are still running out tax-saving options, then you need to re-evaluate your health insurance, where you can claim tax benefit up to Rs, 50,000 in a year under Section 80D of the IT act. Also, this is a time when you can build a corpus by actively investing in Provident Fund or Employee Provident Fund (EPF).
- Retired individuals: If you have crossed the retirement age, then you can enjoy tax-free income up to Rs. 5 lakhs based on the income tax slab eligibility. You can continue to invest in schemes like Senior Citizen Savings Scheme, National Savings Certificate, Equity Linked Savings Scheme, Annuity plans and so on.
Now that you’re aware of the income tax slab for different age groups, you can review and choose an investment plan that suits your goals and risk-taking ability.