Avinash.tech(…)

Income Tax is one thing that everyone fears about , but least understood. Most of the masses are lost in their effort to meet ends or just too lazy to work on the taxes they are paying to the government. Usually it’s a last minute effort to throw their money at anything that has a “Save tax” label attached to them. It does not matter if the scheme they are investing in are sub optimal or sometimes equivalent to giving less returns than a bank Fixed Deposit.  

Income Tax slabs during the time of writing this book are :

Old Tax Regime Slabs (FY 2024-25)

Income Slab	Tax Rate
Up to ₹2,50,000	Nil
₹2,50,001 to ₹5,00,000	5% of amount exceeding ₹2,50,000
₹5,00,001 to ₹10,00,000	₹12,500 + 20% of amount exceeding ₹5,00,000
Above ₹10,00,000	₹1,12,500 + 30% of amount exceeding ₹10,00,000

New Tax Regime Slabs (Default from FY 2023-24)

Income Slab	Tax Rate
Up to ₹3,00,000	Nil
₹3,00,001 to ₹6,00,000	5%
₹6,00,001 to ₹9,00,000	10%
₹9,00,001 to ₹12,00,000	15%
₹12,00,001 to ₹15,00,000	20%
Above ₹15,00,000	30%

Income Range (₹)	Old Regime	New Regime
Up to ₹2,50,000	0%	0%
₹2,50,001 – ₹3,00,000	5%	0%
₹3,00,001 – ₹5,00,000	5%	5%
₹5,00,001 – ₹6,00,000	20%	5%
₹6,00,001 – ₹9,00,000	20%	10%
₹9,00,001 – ₹10,00,000	20%	15%
₹10,00,001 – ₹12,00,000	30%	15%
₹12,00,001 – ₹15,00,000	30%	20%
Above ₹15,00,000	30%	30%

End of the Financial year is when most of us are in a rush to find interesting ways to invest their money just to escape the clutches of TAX Department. The tensions are high, as if they are trying to smuggle drugs hidden in not so ideal places and the their faces show the pain. The sharks in the form of Financial advisors, Banks are extremely happy. On one hand they have to meet their year end deadlines of X customers and just to make sure their prayers are answered, we have people trying to save on income tax, running around with a gunny bag of cash. The gunny bag has to be unloaded somehow to meet the deadline. It has to be fast and least time consuming way to wash their hands of this Tax mess ( or that what they believe it to be ). 

The naive investor’s are easy to come by, all they need to do is put up some banners or announce on notice boards the easy ways to save tax. Most of these “Save Tax Schemes” are driven by the hefty commissions that the agents are entitled to,  on every new client they can get their hands on. 

We all want to save on income tax and most of us do very little research on what’s best for building long term wealth. Doing half the research that goes into finding that brand new Smartphone , released in the market would have made us Rich by now.

March ( as on 2019, when this article was written)  is usually that time of the year where everyone is scampering to max out their 1.5 Lakh Tax exemptions. What most of us miss is the fact that section 80C ,80CCD and so on are to be looked at as vehicles for Compound Interest and contribute to our freedom fund and not just a way to cut down on what we pay to our government as taxes. All investments ideally should be done when the new tax assessment year starts, which is April (Start of Financial Year ) . The idea is to start accumulating on the interest that these Tax Saving Schemes provide each one of us. 

The investment schemes have been divided into A , B and C ratings. These ratings are my own based on experience through family and friends and have worked without fail till date to generate excellent vehicle to create wealth through compound interest. 

And Freedom Fund can be created mostly through 2 ways 

1. Save on Tax you pay on capital gains. 
2. Multiply money through Compound Interest

We will call these FF(Freedom Fund) Ratings going forward.Note that these ratings purely based on my opinion and you free to disagree.

Lets look at them in detail in our next post ! 🙂 . Also read more on the latest tax slabs ( 2020 )

Read Next: Tax Saving Schemes 

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