Once there is a certain amount that has been determined to be income this means that the amount here is not a receipt that is usually capital in nature. For example if there is a loan taken from a bank then this will reflect as an inflow of money for the individual but this is not income but is a receipt that has to be repaid back to the bank. This is also not an amount that is earned by the receiver but is just a figure that has been given for some time with the cost coming in the form of interest and hence is repayable. The first work for the individual is to see whether an amount received is actually income or not. If this is a capital receipt and is not considered as income then the matter ends there but once it is classified as income then the next step comes into picture.

This involves seeing whether the income is taxable. When there is a taxable income it means that the amount that is received has to be considered for the purpose of calculation of the tax on the amount earned. All the amounts that are taxable are to be added together and then they would be totalled up to see the total income earned and the various deductions would be reduced from this figure.

Salary for example is a taxable income so the total amount that is earned as salary would be taken along with the other taxable income like interest or house rent or capital gains. From this figure the various deductions for specified investments and other areas are reduced and the net figure will be checked for the amount of tax that has to be actually paid.

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax PlanInvest Online
2. HDFC TaxSaver Invest Online
3. DSP BlackRock Tax Saver Fund Invest Online
4. Reliance Tax Saver (ELSS) Fund Invest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online
   
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