976 What is Difference between Savings and Threshold limit in tax computation(Concept) Video Link - https://www.youtube.com/watch?v=qcUAgV6heaQ Narration - By Amlan Dutta Method used - Harvard case model. Let me be honest and admit that i didn't knew this when i started learning tax 9 months back . It may sound funny but when people would tell me that the government gives us a a tax relied in terms of threshold levels and we can save on tax , i thought it meant the same thing! Today when i know conceptually and practically how i was totally wrong , i consider it my duty to educate others on it and so we see a live case Say , i am the tax payer and the previous year is 2013 14 where i have income from FD interest income at 10 lacs and no other income Now , my gross total income is sum total of all income heads i.e 10 lacs The first concept of savings comes to play here where the savings are neatly grouped in section 80 under chapter VI A of the act Under section 80 i.e 80 C to 80 U , a individual can invest and reduce his gross total income and hence such investments are called deductions because they help in deducting the gross total income! What remains thereafter is the taxable total income in which tax will finally apply as per slabs (if a individual) and at flat rates (if a company /firm) Lets assume that i invested in Provident fund under section 80 c for 1 lac Clearly then now my gross total income of 10 lacs will get reduced by 1 lac and my total income will be 9 lacs ! Voila , the first part over of understanding the role of savings and now lets come to the tax application on the total taxable income of 9 lacs so arrived at ! Here we will understand the role of threshold levels ! If a individual , then for the previous year under consideration , taxation is slab based as per the finance ministry presented budget for that year In 2013 14 , for non senior (less than 60 years ) resident ( staying in india for more than 182 days ), the slabs were 0-2 lacs nil , 2-5 lacs 10 %,5-10lacs - 20 % and you can see very clearly that i outlined nil for the first slab Thus the first slab is the rlief or in other words the threshold slab i.e indicates the threshold that is the ceiling below which no tax will apply ) So applying that , i get that 0 Rs for 2 lacs slabs ( threshold level ) , then 30000 for 2-5 lacs (10 % for 3 lacs ) and 80000 for 4 lacs slab ( 20 % for 5-9 lacs )...so my tax liability will be 110000 plus 3 % education cess That's it , guys ! Rest is history as this video is now commonplace , Peace , Amlan Dutta

• published: 21 Sep 2014
• views: 1