I often get request to calculate income tax for readers and how they can save more tax! It’s not possible for me to calculate it for everyone. So going forward I would pick cases and show how to calculate income tax and if there is scope to save additional tax.
Below is the comment I received:
Pl calculate my income tax.
I retired on 31 Jul 16. My income from Apr 16 to Jul 16 is Rs. 2,50,000. Thereafter I am getting pension @ Rs. 18700 per month. As on 31 Mar 17 estimate interest on my FDs is Rs. 1,15,000. I have invested Rs. 2,00,000 in senior citizen scheme. Pl confirm how much income tax I have to Pay?
Download: Tax Planning Guide for FY 2016-17
Income Tax Calculation:
As far as possible I would use the format used in filing income tax returns so that its more helpful for everyone.
We first calculate the total income for the financial year (FY 2016-17)
- Income from Salary (April to July 2016) – Rs 2,50,000
- Income from Pension (August’16 to March’17) – Rs 1,49,600 (Rs 18,700 * 8)
- Income from Interest on Fixed Deposit – Rs 1,15,000
Total Income = Rs 5,14,600
The table below calculates the income tax:
The total tax comes out to be Rs 1,504 which is just 0.3% of his income.
Recommendation to Save more Tax:
Disclaimer: The recommendation is made based on limited information we have!
As he pays very little tax there is nothing much to worry. He could have paid even lesser if he could take following tax benefits:
- Sec 80GG in case you live on rent and do not own a house (deduction up to Rs 60,000)
- Section 80D for Health Insurance Premium
Also for senior citizens SCSS is one of the best investments for regular income. So he choose the right investment for tax saving.
Also Read: Best Tax Saving Investments u/s 80C
For next year, FY 2017-18, if all things remain same the income would be significant lower and he does not necessarily invest much in 80C savings.
Let me know if this was helpful and you have any other suggestions!