Income Tax on a Salary of Rs. 4.6 Lakhs per Annum: Rates, Slabs, and Rebates

Calculating income tax for an annual salary of Rs. 4.6 lakhs in India can be straightforward when you understand the applicable tax slabs and rebates. With the current tax regime and recent budget changes, let's explore how to calculate the tax on this income and what rebates could be applied.

No Tax on Rs. 4.6 Lakhs if in New Tax Regime

Under the new tax regime for the assessment year 2023-24, if your total income falls within a certain range, no tax is payable at all. Specifically, if your total taxable income is up to Rs. 5 lakhs, no tax is applicable.

Here’s the overview of the current tax slab rates:

New Tax Regime Slabs

Up to Rs. 2.5 lakhs: Nil tax Rs. 2.5 lakhs to Rs. 5 lakhs: 5% Rs. 5 lakhs to Rs. 7.5 lakhs: 10% Rs. 7.5 lakhs to Rs. 10 lakhs: 15% Rs. 10 lakhs to Rs. 12.5 lakhs: 20% Rs. 12.5 lakhs to Rs. 15 lakhs: 25% Above Rs. 15 lakhs: 30%

For an annual salary of Rs. 4.6 lakhs, the calculation is as follows:

Calculation for Rs. 4.6 Lakhs Salary

Total Income: Rs. 4.6 lakhs Standard deductions

First, let's calculate the taxable income:

Total Income - Standard Deductions Taxable Income

The standard deduction for the financial year 2023-24 is Rs. 50,000. This reduces the total income by Rs. 50,000.

Rs. 4,60,000 - Rs. 50,000 Rs. 4,10,000

Since Rs. 4.1 lakhs falls within the first Rs. 5 lakhs bracket, no tax is owing. Therefore, the income tax for an annual salary of Rs. 4.6 lakhs is:

Total Income Tax Payable: Rs. 0

Additional Rebates: Section 87A

There's another rebate under Section 87A for individuals with a taxable income up to Rs. 5 lakhs. This means that if your total income is just below Rs. 5 lakhs, you can still claim a tax rebate, further reducing your tax burden.

In the case of a salary of Rs. 4.6 lakhs with a standard deduction of Rs. 50,000, the taxable income is Rs. 4.1 lakhs. Since this is less than Rs. 5 lak, you can claim a tax rebate, effectively bringing your tax to zero.

A Look at the Recent Changes in Budget 2023

As of the 2023 Budget, there have been some modifications to the tax slabs. For example, there's no tax on income of up to Rs. 3 lakhs. For income between Rs. 3 lakhs and Rs. 5 lakhs, the tax rate is 5%. For income above Rs. 5 lakhs up to Rs. 9 lakhs, the tax rate is 10%.

These changes can mean significant savings for individuals who fall into certain income brackets.

Investing to Reduce Taxable Income

While no tax is payable on Rs. 4.6 lakhs, you can still manage your finances to reduce the taxable income further. Under Section 80C, eligible investments can be made that bring a tax benefit. These include Public Provident Fund (PPF), NPS, and Equity-Linked Savings Schemes (ELSS).

If you invest up to Rs. 1.5 lakhs annually in these tax benefits, it can reduce your taxable income, potentially bringing it down to Rs. 5 lakhs or less, thereby eliminating your tax liability.

For instance, if your net taxable income is Rs. 5.5 lakhs, a Rs. 1.5 lakh investment under Section 80C can reduce it to Rs. 5 lakhs, thus avoiding tax. If your income crosses above Rs. 5 lak, make use of Section 80C to keep your taxable income within allowable limits.

These strategies not only help you manage your taxes effectively but also promote savings and long-term investments.

Conclusion

Understanding the current tax rates and rebates is crucial for efficient financial planning. For a salary of Rs. 4.6 lakhs, the effective tax is zero under the new tax regime. If your income fluctuates, consider using Section 80C to make tax-saving investments and keep your taxable income within threshold limits. Regularly updating your knowledge on tax laws can save you money and ensure compliance.

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