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How much i should invest to save my tax.
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Hi,
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The amount you need to invest to save the tax of Rs. 12000 depends on which tax bracket you fall into. Let me explain that.
Whatever investment you make (under Sec 80C to save tax) gets deducted from your taxable income. So, if you fall in the 20% tax bracket, you need to invest Rs. 60,000 to save tax of Rs. 12000 (20% of 60000 is 12000). Similarly, if you fall in the 30% tax bracket, you need to invest Rs. 40,000 to save tax of Rs. 12000.
Basically, if you don't want to pay any income tax (that is, if you want to save the ENTIRE tax amount of Rs. 12,000), you would need to invest all your income that is over Rs. 1,10,000 (if you are a male) or Rs. 1,45,000 (if you are a female) or Rs. 1,95,000 (if you are a senior citizen over 65 years old). This would make your tax liability Zero, as these are the limits over which the income tax is charged.
Of course, the limit of investment under Sec 80C is Rs, 1,00,000 - This is the maximum amount that would be deducted from your income for calculation of income tax. This means that even if you invest more then Rs. 1,00,000, only Rs. 1,00,000 would contribute towards saving tax for you.
There are many avenues under Sec 80C to make investments for saving income tax. My favourite, as you would know, is Equity Linked Savings Scheme or ELSS (Please read the article "ELSS is not for someone else" here: http://www.raag...ticle68.html).
But please remember, if you are investing in ELSS, please don't invest in one go - divide your investments in smaller chunks and invest periodically. For this financial year, you can divide your investment amount into 3 parts, and invest each in Jan, Feb and Mar.
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hi preeti
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thx for the reply. what i understood is that, if you fall in 20% tax bracket you multiply 5 with the tax payable and that much amount one should invest to save tax. but then how much one should multiply with tax payable if he falls under 30% tax bracket. waiting for the reply.
stealth
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Hi Stealth!
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20% = 20 / 100 = 1 / 5. So, you multiply by 5.
30% = 30 / 100 = 1 / 3.33. So, you need to multiply by 3.33
So, as preeti has said, if your tax = Rs. 12,000, and you are in 30% tax bracket, you need to invest Rs. 12,000 * 3.33 = Rs. 40,000.
Good luck!
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