Top 10 Tax Saving Tips For Salaried

Top 10 Tax Saving Tips For Salaried

Salaried individuals are getting more and more tax benefit. In the last 2 budgets, the government has given concession to the salaried class. Now the salaried person can avail the benefit of the standard deduction. In this post, I would discuss the top 10 tax benefits available to the salaried employees.

1. Standard Deduction of ₹50 Thousand

Read more   ↓
Loading...

The Standard Deduction is best way of tax saving for the salaried. This deduction alone can save your tax upto ₹15,200. The government has introduced the standard deduction for the salaried class in the Budget of 2018. Earlier this deduction was ₹40,000. But from the FY 2019-20 the standard deduction is enhanced to ₹50,000.

The Standard Deduction is a fixed deduction for every salaried people. They can reduce ₹50,000 from thier taxable income. The salaried class gets standard deduction irrespective of their salary.

Example: If you are getting a taxable salary of ₹5.5 lakh. You can reduce ₹50,000 as a standard deduction from this amount. Thus your taxable income would be ₹5 lakh.

Standard Deduction For Pensioners

For all the practical purpose, the pension is considered as the salary. Hence, all the benefits available to salary is also applicable on pension. Thus, You also get the benefit of standard deduction on Pension. The pensioners can also reduce standard deduction of ₹50,000 from their annual pension.

2. Exemption on House Rent Allowance (HRA)

Many employers give House Rent Allowance to their Employee to meet the expense of the rental dwelling. This allowance also enjoys the tax exemption. This can be a big tax saving as salaried people have to spend a big amount on rent. This Exemption is only available to salaried.

However, All of your HRA is not eligible fot tax exemption. Rather, Some amount of HRA is added to your taxable income. The tax exemption to HRA is decided on the basis of following formula.

The Tax Exempted amount on HRA would be least of the following three.

  1. The HRA, given by your employer
  2. The 50% amount of your Salary. (It would be 40% for non-Metro Employees)
  3. Your Actual Rent minus 10% of your salary

In this formula, ‘Salary’ Consists of your basic salary, Dearness Allowance and Commission if given as a proportion of turnover.

To avail the HRA Tax exemption, you have to provide the Rent receipt and Lease agreement. If your annual rent exceeds ₹1 lakh, you have to also give the PAN details of the landlord.

3.Tax benefit on leave travel allowance (LTA)

If your employer gives leave Travel Allowance, You can further save tax. The Government gives tax exemption on Leave travel allowance (LTA).

Conditions for LTA Exemption

The tax exemption on LTA comes with some conditions. You would get tax benefit if your leave and allowannce fulfill following conditions.

  • Those expenses would be eligible for the exemption which are incurred on travelling with your family. The family consist of your spouse, up to two children, dependent parents and dependent siblings.
  • You must be part of the travel.
  • You must have taken leave for the travel period.
  • The tax exemption is given only for domestic travels.
  • You have to produce all the proofs of travelling. These can be air ticket, boarding pass, rail ticket, bust ticket etc.

Blocks for LTA Exemptions

The LTA exemption is available for every year. Rather you can avail this exemption twice in four years. The government has decided the block of four years. You must know about these block for better planning holiday and tax saving. As of now, the current 4-year block started from 2018. It would end on 2021. From 2022 anothe block would start.

If Missed The LTA Exemption

It may happen that you could not take to two travels during the 4 year block. In this case, you would also lose the opportunity of the tax exemption. However, the government has given a way to claim your tax exemption after the end of block.

Yes! you can use the lapsed LTA exemption in the next block. You can carry over one holiday exemption to the next block of 4 years. But you have complete your holiday in the first year of the block. Hence, you can avail 3 LTA exemptions in the next block.

4. Tax benefits under 80C, 80CCC, 80CCD (1)

Section 80 of the income tax act gives many ways of tax saving. Various investments and expenses are eligible for tax deductions under this section.

  • Employee Provident Fund (EPF)
  • Annuity/ Pension Schemes
  • Life insurance premium
  • Equity Linked Savings Scheme (ELSS)
  • Principal payment on home loans
  • Tuition fees for children
  • Contribution to PPF Account
  • Sukanya Samriddhi Account
  • NSC (National Saving Certificate)
  • Tax Saving Fixed Deposit
  • Post office time deposits

However, the aggregate deduction under this section can’t exceed ₹1.5 lakh in a financial year.

Suppose, you contribute ₹60 thousand in EPF in a financial year. You also deposit ₹1.20 lakh in PPF account. Both of these deposits are eligible for tax deduction under section 80C. So Your aggregate investment eligible for tax deduction would be ₹1.8 lakh. But as I said your tax deduction is limited to 1.5 lakh. Thus, in this case, the remaining investment of ₹30 thousand would not give any tax benefit. This excess amount would be included in your taxable income.

5. Medical Insurance Deduction under Section 80D

The health Insurance also gives you benefit tax deduction under section 80D of the income tax act. Note this deduction is over and above of the section 80C. It only includes the health insurance and health check up. The life insurance is already part of section 80C.

  • The health insurance premium of you and your family is eligible for tax deduction. The family consists of your spouse, children and dependent parents.
  • The normal limit for this deduction is 25 thousands.
  • If you are your spouse is senior citizen then the limit would be ₹50 thousands.
  • If you take health insurance for your parents, there would be extra tax deduction of ₹25 thousands. Moreover, if the parents are senior citizens the limit would be ₹50 thousand for that.
  • You can also include the health check expense up to ₹5000 within this limit.

Do you know a person can avail tax deduction of up to ₹1 lakh using this section of the income tax act? find out how?…..Read More>>>

 

Source:- planmoneytax

 

Share:


loading...

About rajtechnews

Leave a Reply

Your email address will not be published. Required fields are marked *