Worked Example
What tax saving does ₹150K of Section 80C deduction yield in 30% slab?
Scenario
Anjali, age 35, mid-career marketing manager in Mumbai, ₹18 lakh annual income, married with one child, ₹70K monthly household expenses
Inputs
- Slab %
- 30
- Deduction INR
- 1,50,000
- Surcharge cess %
- 4
Calculation
- 1.
Income tax saved at slab rate
₹1,50,000 × 30% → ₹45,000
- 2.
Health & education cess saved (4% on tax)
Tax saved × 4% → ₹1,800
- 3.
Total tax saved
Tax + Cess → ₹46,800
- 4.
Effective contribution after tax saving
Deduction − Tax saved → ₹1.03 L
Conclusion
₹150K of 80C investment in 30% slab effectively costs ₹103K post-tax — the government subsidises the ₹47K through tax saving.
Tradeoffs
Available only in old tax regime. New regime has higher slab thresholds + ₹75K standard deduction but no 80C. Crossover depends on total deductions: ₹2L+ of deductions usually favours old regime for ₹15-25L income earners.