Income Tax Calculation on Annual Salary income of Rs 4 lakhs approx .?

My Friend is earning a annual salary of Rs 4 lakhs approx. He does not get the breakup of his salary as he is paid a lumpsum amount every month. He wants to know what will be his tax liabilty & what investments he will have to make to bring his tax liabilty to minimum.

An Example of Proper Tax Planning

Mr Abhay, 35, a manager in a software company, earns an annual salary income of Rs. 12,09,000. He has existing investments of Rs 2 lacs in 8% GOI Bonds and Rs 2 lacs in 6.5% Tax-Free Bonds. He has also taken housing loan. In the F.Y. 2006-07, he shall pay a total sum of Rs 1,20,000 towards the refund of Housing Loan and the break-up will be Rs 45,000 as principal and Rs 75,000 as Interest.

He visits his investment advisor for tax planning. His investment advisor suggests the following:

The total tax liability of Mr. Abhay without Tax Planning investments under section 80C and 80D is Rs. 3,30,990 (tax-Rs 2,95,000, surcharge-Rs. 29,500, education cess Rs. 6,490) The tax liability after investments under section 80C and 80D is reduced to Rs. 2,93,964.

Hence, Mr. Abhay has saved Rs 37,026 in taxes (Rs.3,30,990-Rs. 2,93,964) Similarly, a person who has retired should allocate his funds at his disposal among various assets classes (cash, debt , stocks etc) in consultation with an experienced financial advisor.

The thumb rule is to park bulk of the funds in avenues and options offering assured return to ensure a regular cash flow and minimize his tax out go.
Every citizen has a fundamental right to avail all tax incentives provided by the government.

Therefore, through prudent tax planning, not only is the income tax liability reduced, but also a better future is ensured due to compulsory savings in highly safe government schemes.

All the best :)

If your friend is a male and <65 years of old:
Total Taxable Income: Rs.4,00,000:
Tax there on Rs.69,000+Edu.Cess=2,070 = Tot. Tax.= Rs.71,070/-

If he invest Rs.1 lakh. in 80c tax savings investments;
4 lakhs-1 lakh 80c= Rs.3 lakhs net taxable
Tax on 3 lakhs. Rs.39,000+ Edu.Cess=Rs.1170=Rs.40,170

Tax Slabs for this year for Male <65 years of age.
Tax free up to Rs.1,10,000
1,10,001 to 1,50,000 @10%
1,51,001 to 2,50,000 @20%
2,50,001 and above @30%
Education Cess @3% on tax amount.
10% Surcharge if the taxable income exceeds Rs.10 lakhs.

About 80c investments:
http://www.rediff.com/getahead/2005/dec/...