How to Pay ‘No’ Tax for the F.Y. 2019-20

The time has arrived for tax planning for the financial year 2019-20.  It is always wise to plan in advance to save maximum tax or pay no tax at all.  Now the tax exemptions were also announced in the Budget 2019.  So this is the right time to make the analysis for saving tax from your salary and reduce the TDS deductions made by your employer monthly.  Let’s have a detailed report on how to pay ‘No’ tax at all. 

There is no change in the Income tax slab rates for the F.Y.2019-20.  Below is the slab rates for the F.Y.2019-20:

Now let’s see what are the deductions are available to save tax.

Standard Deduction

You can simply deduct standard deduction of Rs.50,000/- from your salary income.  There is no proof required for this deduction.  This deduction is in lieu of medical reimbursement and transport allowance.  Earlier the deduction was Rs.40,000/-.

Interest on Housing Loan deduction

If you’ve availed home loan and paying interest, you can deduct the same from your total income of salary.  The total interest deduction allowed on home loan is Rs.2,00,000/-.

House Rent Allowance (HRA) Exemption Calculation

If you’re paying rent for your residential house, the same is exempted from Income tax as per the computation as given below:

The least of the following is eligible for exemption from your salary:

Ø  Actual HRA Received

Ø  50% of Salary (Basic + DA) in case of metro or 40% in case of other cities

Ø  Actual Rent paid (less)10% of (Basic + DA)

Deductions under 80C

You can claim deduction up to Rs.1,50,000/- under section 80C.  The following investments are eligible for deduction:

Ø  Life Insurance Premium (LIP)

Ø  Children Tuition fees

Ø  Home Loan Principal Repayment

Ø  Tax saving Fixed Deposits (FD) – 5 years lock in period

Ø  Equity Linked Savings Scheme (ELSS) Mutual Funds – 3 years lock in period

Ø  Public Provident Fund (PPF) – 15 years lock in period

Ø  Employee Provident Fund (EPF) – Employee’s contribution

Ø  Unit Linked Insurance Plans (ULIP)

Ø  Sukanya Samriddhi Yojana

Ø  National Savings Scheme (NSC)

Ø  Senior Citizens Savings Scheme (SCSS)

The overall limit of deduction under 80C is Rs.1,50,000/- only.

Other Important Deductions under Income Tax

Ø  Additional contribution to National Pension Scheme (NPS) up to Rs.50000/-

Ø  Employer’s contribution to NPS up to 10% of salary

Ø  Interest income from Savings Account up to Rs.10000/-

Ø  Interest paid on Education loan for 8 years

Ø  Medical Insurance of Rs.25000/- for self, spouse and children and Rs.50,000/- for parents above 60 years of age

Tax Rebate under section 87A

If your total income after all the deductions is Rs.5,00,000/- or lesser, you can claim tax rebate of 5%.  You can claim tax rebate up to Rs.12,500/-.

Example Income Tax Calculation