Income Tax: What is it?
Every year, the government imposes income tax on individuals based on their income.
Whether an individual is a resident or a non-resident, he is required to pay this tax to the government if he earns any income in India, such as salary, business income, rent, dividends, etc.
A government of any country has many expenses, such as paying pensions to government employees, building roads and infrastructure, and introducing schemes to benefit citizens, etc. For all these, the government needs money, and income tax is one way to earn it.
Our tax money ultimately goes to run the nation and its development. That is why we pay income tax and receive various services like public parks, roads, and health and education help for the poor.
The Income Tax Calculator: How does it work?
A comparison between the old tax regime (before the 2020 budget) and the new tax regime is provided by this income tax calculator.
Tax slabs with reduced rates are being introduced by the government, and one can compare the old versus the new tax regimes by entering their income information along with their deductions and exemptions.
Additionally, one will be able to calculate the income tax amount under both regimes.
How does the Income Tax Act of 1960 define 80C?
There are various investment options under this section where you can invest and save up to Rs. 1,50,000 annually. 80C is a section in the Income Tax Act, 1960 through which a taxpayer can save up to Rs. 1,50,000 annually.
This section offers the following investment options:
a) Savings plans for seniors (SCSSs):
A senior citizen who is 60 years or older is eligible to participate in SCSS as a savings scheme. Those senior citizens who are at the age of 55 or more but less than 60 (who have retired on superannuation or under VRS) can also benefit from this scheme, but the amount should not exceed the number of retirement benefits received.
The senior citizen can apply for this program at his or her nearest post office. A joint account can be opened with only their spouses or husbands (with the first depositor as the investor).
b) ELSS (Equity-Linked Savings Scheme):
Investments in ELSSs have a mandatory lock-in period of three years, and they are riskier than other options such as Public Provident Funds, National Saving Certificates, etc. However, they also have the potential to offer superior returns. In accordance with Section 80C of the Income Tax Act, investments in ELSSs are eligible for tax deductions up to Rs 1.5 lakh.
c) Public Provident Funds (PPF):
The Government of India offers a 15-year PPF investment option with an attractive interest rate of 8% (returns are tax-free). In a financial year, one may invest between Rs. 500 and Rs. 1,50,000. Deposits can only be done in 12 transactions. One can also take out loans, withdraw funds, and extend the account. It is possible to take out loans from the Public Provident Fund between the third and sixth financial years. After the 7th financial year, partial withdrawals are permitted. It is possible to extend the account for an additional 5 years but in a block-in format.
There are also many other options that can be used as a savings scheme, but using an online tax calculator would actually make all our tax related calculations simpler!
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