(Online Desk)

As the National Democratic Alliance (NDA) government braces to present its last full Budget on Thursday before seeking re-election, expectations are running high that Finance Minister Arun Jaitley will include the much-needed goodies in the tax basket.

While we shall soon know if Jaitley will leave more money in our pockets lowering taxes or if he will do otherwise, here's all you need to know about the tax slabs and some of the key exemptions. Currently, taxpayers are classified under four income groups, but we only have three tax rates as individuals earning up to Rs 2.5 lakh per annum are exempt from paying any tax. They still have to file annual income returns though. Those earning between Rs 2.5 and Rs 5 lakh have to pay 5 per cent tax, income earners between Rs 5 and Rs 10 lakh are taxed at 20 per cent and individuals with over Rs 10 lakh annual income attract 30 per cent tax.

On top of these tax slabs, individuals earning above Rs 2.5 lakh have to pay three per cent (of total income) towards education cess. But, wait. These rates are applicable not based on the total income, but only on taxable income. That means, before these rates can apply, there are deductions one can avail to lower the annual tax outgo. For instance, though individuals earning below Rs 2.5 lakh are exempt from paying tax, if you take into account all the deductions, the zero tax rate extends to all those earning up to Rs 3 lakh. Here, we list some of the major sections that let you pay less.

Currently, a taxpayer can avail deduction up to Rs 1.5 lakh per year under Section 80C, 80CC and 80 CCD (1) as per Section 80 CCE of the Income Tax Act. These can be money invested in mutual fund-based tax schemes, public provident fund, employee provident fund, post office schemes, children’s tuition fee, life insurance premium, annuity plans, stamp duty charges for purchase of new house and repayment of the principal amount of a home loan etc. Next major deduction includes interest payments.

First time home buyers, under Section 80EE can claim an additional deduction of Rs 50,000, besides the maximum limit on interest payment on home loan (for a self-occupied house) set at Rs 2 lakh. If it's given on rent, the entire interest component is tax exempt. Don't fret on losing out if you don’t own a house and at the same time aren't getting any house rent allowance from your employer. You can still claim tax benefit of Rs 5,000 per month or 25 per cent of your total income.

Likewise, one can avail tax deduction under Section 80E, which is interest paid on education loan, but this is applicable only for eight years. Next is premium paid on health insurance, up to a maximum of Rs 60,000, including Rs 30,000, if you insure your parents above 60 years. Medical reimbursement is another taxsaving option, but currently the maximum limit is set remarkably low at Rs 15,000 a year. Then there are other deductions like contributions to charitable trusts, political parties, treatment of critical diseases that allow you to claim tax benefits.

Health Insurance: A 60,000 The maximum premium amount that can be deducted under Section 80D if one insures for their parents aged above 60 also.