How Do You Handle Professional Tax and TDS Deductions While Maximizing Tax Savings?

Could anybody please let me know how to make deductions regarding professional tax as well as TDS from salaries and how we can save on our taxes by showing our investments? Please also provide information on the percentages for HRA, LIC, etc.

Thanks & Regards,
Pooja

Here are a few tips on how you can save on your income tax by investing smartly and relieving yourself from all the tensions and stress.

6 Steps to Help You Avoid Investment Blunders:

1. **Formulate a Plan:** At the beginning of the financial year, outline how much you plan to invest in different asset classes. Then, spread out this amount over the next 10-12 months.

2. **Choose Correctly:** Invest in a tax-saving option based on your overall financial planning. Invest in an option only if it helps you achieve a specific financial goal (such as retirement, child's education, or insurance coverage).

3. **Automate Your Investments:** Set up an ECS mandate for your investments in ELSS, ULIPs, and other options. This will ensure that even if you forget to invest each month, your bank will not.

4. **Avoid Long-term Plans:** Do not rush into buying insurance products. These are long-term commitments, and it's essential to take time to assess and compare the features. Avoid committing yourself to multi-year payments.

5. **Know Your Deductions:** Consider deductions like tuition fees for children and home loan repayments when calculating how much you need to save under Section 80C. Many taxpayers are unaware of how much they have contributed to the PF in a year.

6. **Avoid Health Cover Solely for Tax Savings:** Everyone needs health insurance. The government provides a deduction for the premium. Do not view this as just a tax-saving strategy. Purchase a plan only after carefully considering its features and clauses.

To read the full article, please visit http://epaper.timesofindia.com/Defau...Mode=HTML&GZ=T.

Regards,
Archna

Income Tax Calculation for Financial Year 2010-11

I shall insert an Excel worksheet for Income Tax Calculation on salary for the Financial Year 2010-11 (Assessment Year 2011-12). Prior to that, I wish to explain some details to get an idea to enter the inputs.

On gross salary, the following deductions are applicable:

- Professional Tax
- House Rent in excess of 1/10th of salary subject to a ceiling equivalent to HRA
- Interest on Housing loan subject to a ceiling of Rs. 1,50,000
- Refund on Housing loan, savings, tuition fee for 2 children, etc., all subject to a ceiling of Rs. 100,000
- Additionally, savings on infrastructure bonds up to Rs. 20,000
- Apart from the above, deductions of one lakh, 15,000 to 20,000 towards mediclaim premium, 40,000 to 60,000 towards treatment for specified diseases like Motor Neuron disease, 75,000 to 100,000 towards disability, etc., are also admissible.

Calculating Taxable Income

Now, taxable income can be calculated as follows:

Gross salary - total deductions = Taxable income

Taxpayer Categories

Taxpayers can be categorized into three groups:

1) Non-Seniors - Male
2) Non-Seniors - Female
3) Senior Citizens (65 years old and above)

If the taxable income is Rs. 2,40,000, a Senior Citizen is fully exempted from paying tax. Non-Senior Female has to pay in excess of Rs. 1,90,000, and Non-Senior Male in excess of Rs. 1,60,000.

For income beyond the mentioned thresholds, one has to pay 10% up to Rs. 5,00,000, 20% thereafter up to Rs. 8,00,000, and 30% in excess of Rs. 8,00,000. Additionally, an education cess at 3% will be charged on the Total Tax.

Example Calculation

Gross income of a Non-Senior Male - Rs. 12,00,000

Deductions (actual): Professional Tax - 12,000, Housing loan interest - 2,00,000, Total savings/deductions - 2,50,000, Savings on Infrastructure bond - 25,000, other deductions over 1,00,000 - 50,000.

Admissible total deductions (subject to ceiling limits) - 12,000 + 1,50,000 + 1,00,000 + 20,000 + 50,000 = 3,32,000

Taxable income: 12,00,000 - 3,32,000 = 8,68,000

For Non-Senior Male:

- Rs. 1,60,000 is exempted.
- For the next 3,40,000 (5,00,000-1,60,000), 3,40,000 * 10% = 34,000 -(1)
- For the next 3,00,000 (8,00,000-5,00,000), 3,00,000 * 20% = 60,000 -(2)
- For the remaining 68,000 (8,68,000-8,00,000), 68,000 * 30% = 20,400 -(3)

Total Tax = (1) + (2) + (3) = 1,14,400

Tax for Non-Senior Female: 1,14,400 - 3,000 = 1,10,400

Tax for Senior Citizens: 1,14,400 - 8,000 = 1,06,400

Education Cess: 1,14,400 * 3% = 3,432

Total Tax: Rs. 1,17,832

Please refer to the Excel Sheet. Enter gross salary and applicable deductions/savings in the green column. Results will be displayed in the yellow column. The red color is used for static data.

Regards,
ABBAS.P.S,
ITI Ltd, PALAKKAD - 678 623,
KERALA, INDIA.
Ph. [Phone Number Removed For Privacy Reasons]