EXAMPLE OF TAX

PLANNING
GAMGOTHRI C H
21311030
 What is Tax Planning ?
Tax planning refers to financial planning for tax efficiency. It aims to reduce one’s tax liabilities
and optimally utilize tax exemptions, tax rebates, and benefits as much as possible. Tax planning
includes making financial and business decisions to minimize the incidence of tax
Objectives of Tax Planning
Reduced Tax liability

Productive Investment

Growth of the economy

Litigation Minimization

Economic Stability
Tax Planning
Example
Statement showing tax calculation of Mr. Rahul (FY – 2019-20) before Tax planning

Annual CTC 16,00,000

Basic Salary (50% of Annual CTC) 8,00,000
Exemption :
EPF Employer’s Contribution (12% of Basic Pay ) (96,000)
Gross Salary 15,04,000
Deductions:
Standard Deductions (50,000)
Taxable Income 14,54,000
Tax on Net Income 248,700
Surcharge 0
Health and Education Cess 9,948
Total Tax Liability 258,648
 New Tax Regime Old Tax Regime

Tax on Net Income 188,700 248,700

Income Tax Rebate u/s 87 0 0

Tax After Rebate 188,700 248,700

Surcharge 0 0

Education Cess 0 0

Health & Education Cess 7,548 9,948

Total Tax  196,248 258,648

* Surcharge applicable when taxable income exceeds Rs.50 Lakhs

Opt for New Tax Regime (Scheme) as you save Rs. 62400
Statement showing tax calculation of Mr. Rahul (FY 2019-20) after Tax planning
Basic Salary 8,00,000
Exemption :

EPF Employer’s Contribution (12% of Basic Pay ) (96,000)

Gross Salary 15,04,000
Exemption under section 10
HRA (25,000)
Children Education Allowance (2 Kids) (2,400)
Children Hostel Allowance (2 Kids) (7,200)
LTA ( Twice in 4 years ) (50,000)
Net Taxable Salary 14,19,400
Net Taxable Salary 14,19,400
Deductions:
Standard Deductions (50,000)
Sec 24 – Loss From House Property
( Rent – Property Tax – 30% Rent – Interest ) (2,00,000)
Sec 80 C – Investment up to 1.5 Lakhs
(EPF, PPF Home Loan Principal, ELSS, ULIP, Life Insurance Premium, (1,50,000)
SSY, Tuition Fee)
Sec 80CCD (1B) – Additional 50,000 for NPS (50,000)
NPS (Employer’s Contribution Up to 10% of Salary) (1,04,000)
Sec 80D – Medical Insurance Premium (25,000)
Sec 80E – Interest on education Loan (50,000)
Sec 80EE – Additional 50,000 interest on home loan (50,000)
Sec 80TTA – Interest on savings A/c up to 10,000 (10,000)
Taxable Income 7,30,400
Total tax liability 60,923
 New Tax Regime Old Tax Regime

Tax on Net Income 167,350 58,580

Income Tax Rebate u/s 87 0 0

Tax After Rebate 167,350 58,580

Surcharge 0 0

Education Cess 0 0

Health & Education Cess 6,694 2,343

Total Tax 174,044  60,923

* Surcharge applicable when taxable income exceeds Rs.50 Lakhs

opt for Old Tax Regime (Scheme) as you are paying excess 113121 payment with the New
tax regime.
Thank You