How to Know Which Tax Bracket You Fall Into in Financial Year 2014-15?

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Had a salary hike recently? Apart from the joy of getting more money you may also end-up paying more money in taxes. This is because you may suddenely move from the 20 per cene to 30 per cent tax bracket or from the 10 per cent to the 20 per cent tax bracket.

You need to therefore plan your taxes accordingly and it is therefore first important to understand which tax bracket you fall in. 

How to Know Which Tax Bracket You Fall Into in Financial Year 2014-15?

Here is quick guide of tax bracket for individuals depending on the Income. Please note that there will be a marginal increase to the below rates on account of Education Cess.

General Tax Payers and Women

Income Tax Slab (in Rs.) Tax Slab
0 to Rs 2,50,000 No tax
2,50,001 to 5,00,000 10% 
5,00,001 to 10,00,000 20%
Above 10,00,000 30%

Senior citizens (Aged 60 years but less than 80 years)

Income tax slab (in Rs.) Tax Slab
0 to 3,00,000 No tax
3,00,001 to 5,00,000 10%
5,00,001 to 10,00,000 20%
Above 10,00,000 30%

Very senior citizens (Aged 80 and above)

Income tax slab (in Rs.) Tax Slab
0 to 5,00,000 No tax
5,00,001 to 10,00,000 20%
Above 10,00,000 30%

Now, while these may be your tax bracket, it does not mean that you will end-up paying the same rate of taxes mentioned above. This is because you get a number of tax exemptions. Let us take an example. Say you earn an income of Rs 5.5 lakhs, which means you are in the 20 per cent tax bracket.

Now, if you make investments under Sec 80C of the Income Tax you are entitled to another Rs 1.5 lakhs as tax benefits under the said section. This means that your taxable income now gets reduced to Rs 3.5 lakhs, which will substantially reduce your taxes. Apart from SEC 80C there are many other sections under which you can claim tax benefits.

For example, Health Insurance under SEC80D qualifies for a tax rebate of upto Rs 18,000 per month. There are many such sections under which you can get tax breaks. Read more on them here .

Please note that each year the tax slabs will change as the government tweaks personal income tax slab. For example, in the last Union Budget of 2014-15, Finance Minister Arun Jaitley increased the tax slab to Rs 2.5 lakhs from Rs 2 lakhs. 

The Union Budget for 2015-16 is slated for Feb 28 and we might see yet another revision in the tax slab. It is hoped that the government would hike the tax slab once again. Last year they hiked the tax rate and at the same time hiked the limits under Sec 80C.

Conclusion

It's extremely important to check your tax bracket before you file your income tax returns. As mentioned earliet tax slabs and rates keep changing each year and one needs to watch-out for them each year.

GoodReturns.in

Read more about: income tax
Story first published: Tuesday, February 3, 2015, 10:23 [IST]
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