Mutual Funds, Provident Funds, Insurance: If you invest in any mutual funds, Provident Fund or Insurance of any kind, you can save tax under Section 80C of the Income Tax Act. For example, if you invest up to Rs1. 5 lakh in these funds or policies, you can save tax up to Rs46,350.
They manage their wealth in a unique way compared to regular people. They invest their money in stocks or real estate, which are not taxed until they are sold. As a result, the wealthy keep getting richer as their assets appreciate in value, but they do not pay taxes on them.
The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act, Section 80C includes various investments and expenses you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year.
“In theory, India employs several mechanisms that are aimed at taxing the rich. These include a progressive income tax rate structure, tax on capital gains, tax on gifts, and a surcharge on income tax on the super-rich,” says Vidushi Gupta.
Donating money gives you not only the satisfaction of doing a good deed but also tax benefits. In order to save taxes by making donations, you need to donate to the registered charities and funds such as PM's relief fund. You can also donate to a recognised political party to claim tax breaks.
By being aware of the latest tax rulings and regulations, a CA can help you save on taxes and make necessary filings and advance tax payments before the due date.
An annual wealth tax—2% on wealth over $5 million, 3% on wealth over $50 million and 5% on wealth over $1 billion—would raise $78.3 billion a year, according to FIA's estimates.
A back-of-the-envelope calculation shows that levying a 2 per cent wealth tax on promoters of listed companies with a net worth of $1 billion or more would garner the Government of India nearly Rs 1.1 trillion ($14.6 billion) in taxes annually.
Nirmala Sitharaman announced that individuals earning more than Rs 5 crore a year would pay a surcharge of 37.5 percent on their tax, over above their 30 percent marginal tax.
The rich and the wealthy do no pay any tax on crores of their investment income, but the poor and the middle class have to pay taxes even on a small amount of interest received from banks on their savings account and fixed deposits.
The intention of doing so is to bring parity amongst the taxpayers. However, wealth tax was abolished in the budget of 2015 (effective FY 2015-16) as the cost incurred for recovering taxes was more than the benefit is derived. Abolishing the wealth tax also simplified the tax structure.
Calculation of Wealth Tax
All individuals and Hindu Undivided Family with net wealth above ₹30 lakh were required to pay wealth tax. This means that if the total net wealth of an individual, HUF or company exceeds ₹30 lakhs, on the valuation date, a tax of 1% will be levied on the amount in excess of ₹30 lakhs.
James Wilson, the Scotsman who created India's first Budget, introduced the income tax act in 1860.
For a salary ranging between Rs 20 lakhs and Rs 25 lakhs, the applicable tax rate under the new tax regime would be the highest, that is 30%. Incidentally, this is the same tax slab that your salary would fall under according to the existing tax regime, that is 30%.