Income Tax Slab Rate and Tax Saving Options in India

Income Tax Slab Rate and Tax Saving Options in India

People from any kind of financial field must have basic knowledge regarding income tax slab rate and tax saving options in India. As India has a diversified investment field, there are multiple Tax Saving schemes available in India.  For the newbies, income tax slabs, rules, process, tax saving options can seem too tedious as well as daunting for the first time. Actually, the subject is not as hard as it seems. Only the basic knowledge can fulfill the purpose. Hence, today we are going to cover some basic topic under the income tax. Let’s begin from the very basic.

What is Income Tax?

In simple terms, depending on the income, each individual person has to give a certain tax directly to the Government, refers as income tax. First income tax was introduced in India in the year 1860 but currently, 1961 tax act is applicable in India.

Broadly there are two types of income tax present in India, one is Directly payable tax and the other is an Indirectly payable tax. As people directly pay income tax to the Govt, it falls under the category of Direct Tax.

There are different slabs of Income Tax according to the age, profession, and income. After demonstrating the income tax slab rate, we will go for multiple and varieties tax saving options in India.

Income Tax Slab Rate

In order to avoid confusion while paying tax to Govt, income tax Tax Slab Rate is different based on Age group, Income, Profession. The latest 2018-19 slab rates are mentioned below (as per the Indian Govt Rule)

Income Tax Slab for Individual (Age Less than 60 Years)

Income range per annumTax Rate FY 2018-19, AY 2019-20 
Up to Rs. 2.5 lakhsNo Tax
Above Rs. 2.5 lakhs to Rs. 5 lakhs5% + 4% cess
Above Rs. 5 lakhs to Rs. 10 lakhs20% + 4% cess
Above Rs. 10 lakhs to Rs. 50 lakhs30% + 4% cess
Above Rs. 50 lakhs to Rs. 1 crore30% + 10% surcharge + 4% cess
Above Rs. 1 crore30% +15% surcharge + 4% cess

Tax Slab for Individual (Age More than 60 Years but Less than 80 Years)

Income range per annumTax Rate FY2018-19 
Up to Rs. 3 lakhsNo Tax
Above Rs. 3 lakh to Rs. 5 lakhs5% + 4% cess
Above Rs. 5 lakhs to Rs. 10 lakhs20% + 4% cess
Above Rs. 10 lakhs to Rs. 50 lakhs30% + 4% cess
Above Rs. 50 lakhs to Rs. 1 crore30% + 10% surcharge + 4% cess
Above Rs. 1 crore30% +15% surcharge + 4% cess

Income Tax Slab for Individual (Age More than 80 Years)

Income range per annumTax Rate FY 2018-19 
Up to Rs. 2.5 lakhs per annumNo Tax
Up to Rs. 5 lakhs per annumNo Tax
Above Rs. 5 lakhs to Rs. 10 lakhs20% + 4% cess
Above Rs. 10 lakhs to Rs. 50 lakhs30% + 4% cess
Above Rs. 50 lakhs to Rs. 1 crore30% + 10% surcharge + 4% cess
Above Rs. 1 crore30% +15% surcharge + 4% cess

For Firms and Domestic Companies FY 2018-19

Tax HeadFirmsDomestic Companies
Income Tax for turnover upto Rs. 250 crores30%25%
Income Tax for turnover above Rs. 250 crores30%30%
Surcharge as the percentage of income tax12% of tax in case the annual income exceeds One crore5% of tax in case income is more than one crore but less than Ten crore.
10% of tax in case income is more than Rs. 10 crore.
Cess as percentage of tax and surcharge4% of tax + surcharge4% of tax + surcharge

Tax Saving Options in India

The above basic data reflects Indian Govt Income Tax slab. Now, we will move on to the next part of the content, Tax Saving Options in India. There is a quote of Benjamin Franklin “In this world, nothing can be certain, except death and taxes”. However, there are a number of smart and effective ways by which people can save tax up to a certain limit and enjoy maximum savings.

Almost most of the people don’t take the tax planning seriously but tax planning is always a smart approach in investment. In the Section80C, Section 80CCC, and, Section 80CCD Govt specified certain saving instruments by which common men can save their hard earned money. Here, we are going to list down some of the best tax savings options in India.

Tax Saving Options in India

List of Tax Saving Schemes

  • PPF or Public Provident Fund: Almost all people from any financial field is aware of PPF or public provident fund. It is one of the most popular savings cum tax saving instruments in India. As per the current information (as it keeps changing every three months) PPF offers 8%/annum. Someone who is paying 31.2% tax (highest income slab), comes up with nearly 11.62% taxable return.
  • EPF or Employees Provident Fund: EPF or Employees Provident Fund is another avenue for salaried person. An employee contributes 12% of basic salary/month in his EPF account. An equal share is contributed by the employer (but only 3.67%) goes to EPF. Under Section80C employee can get up to 1.5 lakh tax benefit (but not on the employer’s share).
  • ULIP: Unit Linked Insurance Plans, also known as ULIPs is kind of a hybrid product which is a combo pack of insurance and investment. It allows a maximum exemption of Rs.1 lakh/year. Depending on the scheme, it provides returns of 5% to 11% returns.
  • National Saving Certificate: The issuer of NSC is the post office but the interest is backed up by the Govt of India. As per the current information, it is available for 5 years periods with the minimum investment of Rs.500. However, interest can be claimed as an exemption within the limit of 1.5 lakhs. All the age group can apply for the certificate.
  • New Pension Schemes: People who are looking for retirement savings, may try this NPS or New Pension Schemes as a tax savings scheme. The minimum investment limit is Rs.500 and there is no maximum limit of investment. There are numbers of NPS schemes which can give returns between 10% to 15%. However, in the Tier-1 scheme, people can invest up to 1.5 Lakh and get an exemption.
  • Sukanya Samriddhi Account Scheme: If you have a girl child, this plan is apt for you. Here, you can invest up to 1.5 lakhs with the interest rate of 8.1% per annum. Parents can hold the scheme until the girl attains 15 years. Here, the interest after maturity of the scheme is free.

Tax Saving Options in Mutual Fund

The mutual fund is such a vast investment field in the Indian Financial Market. There are lots of income tax saving options available in mutual fund schemes:

  • ELSS Mutual Fund: ELSS or Equity Linked Savings Scheme is a Mutual Fund division which is a diversified equity scheme. ELSS has two different characteristics. First one is, it has tax benefit up to a limit of Rs. 1 lakh each year, the Secondly, the invested amount has a 3 years lock-in period. Long term capital returns from these schemes are tax-free.

Some of the biggest fund houses which offers ELSS funds are as follows:

Post Office Tax Saving Schemes

Under the tax saving section of 80C, there are post office tax saving schemes too. People can claim up to Rs.1 lakh as tax benefits each year through the multiple post office investment options. Here is the list of major tax savings schemes offered by the post-office:

  • Recurring deposit account for 5 years
  • Time deposit account
  • SCSS or Senior Citizen Savings Scheme
  • 15 years PPF (Public Provident Fund) account
  • NSC or National Savings Certificate (VIII issue)

Tax Saving FD (Fixed Deposit)

Scheduled banks offer tax saving fixed deposit schemes with a tenure of max 5 years. Here, also investors can claim up to 1.5 lakh tax benefits through these schemes. The list of top banks with tax saving FD schemes is given below:

  • ICICI
  • Axis
  • HDFC
  • SBI
  • IDBI

Traditional Life & Health Insurance Plans

Life Insurance and Health Insurance are some of the traditional insurance plans and options for tax savings. You can get tax benefits from this traditional insurance schemes. As there are multiple and variety of schemes available under it, it is advisable to check the information minutely prior to investment.

In this article, I’ve tried to collect and distribute basic information regarding Income Tax Slab Rate and Tax Saving Options in India. For the newcomers, this article is enough to give proper guidance about income tax slab rate and savings options in India.

Income Tax Slab Rate and Tax Saving Options in India

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