Tax Exemption limit may be raised to 1.7-2.0 lacs

POSTED BY Jagoinvestor ON May 20, 2009 COMMENTS (2)

Today in morning newspaper, I read that in this budget Tax exemption limit may be raised to 1.75-2.00 lacs . What will that mean to a common person like us .

It simply means that we will be left with some extra surplus every year .

A male who has taxable salary of 4 lacs per year and has 1.5 lacs as exemption limit , pays around 40,000 as tax . Now , after the exemption limit is raised to 2 lacs (assumption) , there can be 2 scenarios .

Read How to calculate Tax and tax slab for year 2008-2009

Scenario 1 : Exemption limit is raised but tax rates are not . Current tax rate is not

10% for 1.5 – 2.5 lacs
20% for 2.5 – 5 lacs
30% for 5+ lacs

In this case , he will have to pay 35,000 as tax (assuming tax rates for 2008-2009) . This means a saving of 5,000 on tax from previous year .

Scenario 2 : Exemption limit is raised and tax rates are also adjusted. A common sense guess would be

10% for 2-3 lacs
20% for 3-5 lacs
30% for 5+ lacs

It must be something like that , this is the minimum we will/should get

In this case , the tax would be 30,000 , and savings would be 10,000 per year.

What can this small amount do ?

So we can save in range of 5,000 or 10,000 or someother amount depending upon the changes. What can be the value of this for us as investment point of view.

this money can be invested in a mutual fund through SIP monthly for next 30 yrs ,

5000 can make
14 lacs at 12%
29 lacs at 15%

10,000 can make
29lacs at 12%
58 lacs at 15%

Assumption is that the money can be divided in 12 equal installment and can be invested per month .

What do you think about this ?

Did you check video post for Basic formula’s in Personal Finance and How to choose Mutual funds ?

– Subscribe to jagoinvestor google groups
– Follow me on twitter
– Please leave your Comments/suggestions/disagreements .

2 replies on this article “Tax Exemption limit may be raised to 1.7-2.0 lacs”

  1. Manish Chauhan says:

    Raja

    You are correct that the amount is less from inflation paramter . But we are just seeing here that how can we deploy that extra money one can save from tax , so that we can make some respectable money at the end , which can be used for some small purpose like Vacation ,buying a new car or can be used with important things .

    How are you planning to invest ? Would you like to share some of your experiences .

    Manish

  2. Anonymous says:

    Good Job Manish…But i feel the goals are too small based on the inflation parameter..it should be little bit higher..Meanwhile as usual ur article is good..keep up the good work.

    thanks,
    raja

Comments are closed.



About Jagoinvestor

Jagoinvestor is a financial literacy website which is working towards empowering investors to take better financial decisions and make informed choices while buying financial products and living a good financial life.

Join 1,60,000 readers + FREE Ebook

Never miss the valuable emails from us. Subscribe now and get a highly valuable ebook containing the best of our content.

Things we do

We have various things to offer to investors which can help them to gain knowledge and work on their financial life.

Join 1,60,000 email subscribers

FREE Video Lessons directly in your email daily

144 page PDF ebook with best articles from Jagoinvestor

Get future articles directly on your mailbox + updates


6 PART VIDEO COURSE

FREE 

 

 

You are subscribed for FREE Course now, Check your Email

CONGRATULATIONS

Join 1,60,000 email subscribers

FREE Video Lessons directly in your email daily

144 page PDF ebook with best articles from Jagoinvestor

Get future articles directly on your mailbox + updates


6 PART VIDEO COURSE

FREE 

 

 

You are subscribed for FREE Course now, Check your Email

CONGRATULATIONS