This is a process that individuals, businesses and organizations use to evaluate their financial profile with the aim of minimizing the amount of taxes paid on personal income or business profit. Effective tax planning entails analyzing financial instruments, expenditures, and other factors such as filing status for their tax liability impact.
Income Tax benefits for Individuals and HUF:
1.U/s. 80C – Investment made under this section will allow you to take the maximum benefit of upto 1.5Lacs.
Instruments – Life Insurance Policy, Tuition fee for children’s education, PPF, EPF, ELSS Home Loan Principal, Postal SSY schemes, NSC, Sr.Citizen schemes, Tax saving FD’s upto 5years & Infrastructure bonds.
2.U/s. 80D – Investment made under this section allows you to take the maximum benefit of upto 50 Thousand.
Instrument – Health Insurance Policy for self, Family, and Parents.
3.U/s. 80G – Donations made to any institution or charitable Trust are eligible under this section with either 100% or 50% exemption depending upon the institution.
4.U/s. 10(10D) – All maturity or death benefits received from the life insurance policy are 100% exempted from Income Tax ACT 1961.
5. Tax implication on Mutual Funds.
Fund type | Short-term capital gains | Long-term capital gains |
Equity funds | Shorter than 12 months.15% + cess + surcharge | 12 months and longer.Up to Rs 1 lakh a year is tax-exempt. Any gains above Rs 1 lakh are taxed at 10% + cess + surcharge |
Debt funds | Shorter than 36 months.Taxed at the investor’s income tax slab rate | 36 months and longer20% + cess + surcharge |
Hybrid equity-oriented funds | Shorter than 12 months.15% + cess + surcharge | 12 months and longer.Up to Rs 1 lakh a year is tax-exempt. Any gains above Rs 1 lakh are taxed at 10% + cess + surcharge |
Hybrid debt-oriented funds | Shorter than 36 months.Taxed at the investor’s income tax slab rate | 36 months and longer20% + cess + surcharge |
Tax Slabs for AY 2022-23
Individuals and HUFs can opt for the Existing Tax Regime or the New Tax Regime with lower rate of taxation (u/s 115 BAC of the Income Tax Act)
The taxpayer opting for concessional rates in the New Tax Regime will not be allowed certain Exemptions and Deductions (like 80C, 80D,80TTB, HRA) available in the Existing Tax Regime.
 | For Individual (resident or non-resident) less than 60 years of age anytime during the previous year:
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 | For Individual (resident or non-resident), 60 years or more but less than 80 years of age anytime during the previous year:
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For Individual (resident or non-resident) 80 years of age or more anytime during the previous year:
Existing Tax Regime | New Tax Regime u/s 115BAC | ||
|---|---|---|---|
Income Tax Slab | Income Tax Rate | Income Tax Slab | Income Tax Rate |
Up to ₹ 5,00,000 | Nil | Up to ₹ 2,50,000 | Nil |
₹ 5,00,001 – ₹ 10,00,000 | 20% above ₹ 5,00,000 | ₹ 2,50,001 – ₹ 5,00,000 | 5% above ₹ 2,50,000 |
Above ₹ 10,00,000 | ₹ 1,00,000 + 30% above ₹ 10,00,000 | ₹ 5,00,001 – ₹ 7,50,000 | ₹ 12,500 + 10% above ₹ 5,00,000 |
₹ 7,50,001 – ₹ 10,00,000 | ₹ 37,500 + 15% above ₹ 7,50,000 | ||
₹ 10,00,001 – ₹ 12,50,000 | ₹ 75,000 + 20% above ₹ 10,00,000 | ||
₹ 12,50,001 – ₹ 15,00,000 | ₹ 1,25,000 + 25% above ₹ 12,50,000 | ||
Above ₹ 15,00,000 | ₹ 1,87,500 + 30% above ₹ 15,00,000 | ||