Ashwin's annual salary was Rs 150000 . He contributed Rs...

Ashwin's annual salary was Rs 150000 . He contributed Rs 5000 to PPF (Public Provident Fund) and Rs 10000 to NSC (National Savings Certificate). Find the income tax paid by him (in $\mathrm{Rs}$ ).
(1) 10200
(2) 10500
(3) 10800
(4) 11200

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Key Concepts

Tax Rate Structure

The tax rate structure or tax slabs determine the percentage of tax applicable to various levels of taxable income. This concept is crucial because the taxable income, after deductions, is subjected to these rates, which ultimately determine the final tax liability. Comprehending how different segments of income are taxed helps in accurately calculating the overall tax payable.

Gross Income and Taxable Income

This concept involves starting with an individual’s total income (gross income) and then subtracting allowable deductions to arrive at the taxable income. The process of determining taxable income is essential in computing how much tax needs to be paid, as tax is applied to this lower figure after accounting for eligible contributions and investments.

Tax Deduction for Savings and Investments

Many tax systems offer deductions for contributions to specific savings schemes or investments. These deductions lower the overall taxable income, which in turn reduces the amount of income tax that must be paid. Understanding how investments in approved financial instruments can be utilized to minimize taxable income is a key aspect of tax planning.

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