The popular talk around is earn, save and invest. What about taxes? Is not saving every rupee in taxes the legal way important? Yes, check the tax efficiency which is nothing but after tax return on an investment.
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You are eligible for gratuity on continuous service in an organization of 5 or more years. The gratuity you get from employer is tax-exempt up to certain limits. Gratuity is fully tax-exempt for Government Employees. It’s tax-exempt up to Rs 20 Lakhs for private employees. This is for all gratuities across work life.
You enjoy the EEE tax benefit on the EPF investment. There’s a Section 80C tax benefit up to Rs 1.5 Lakhs a year. The interest and maturity withdrawals are tax free. EPF offers an interest rate of 8.65% and is the highest among fixed income instruments.
From the next Financial Year 2020-21 the contribution employer makes to your employee provident fund and NPS and superannuation fund is tax-exempt. This happens only if contributions to all your accounts are up to Rs 7.5 Lakhs in a fiscal year.
An employer contributes 12% of employee’s basic salary to the EPF account. The employer contributes up to Rs 1.5 Lakhs a year towards superannuation account. The employer may contribute up to 10% of employee’s basic salary towards NPS tier-1 account.
The PPF investment enjoys Section 80C tax benefit up to Rs 1.5 Lakhs a year. The interest payouts and the PPF withdrawals are tax-free.
SSY or the Sukanya Samriddhi Scheme launched as part of the 'Beti Bachao Beti Padhao' is a great scheme for the girl child. This scheme enjoys the EEE tax benefit. There’s a Section 80C tax benefit up to Rs 1.5 Lakhs a year. Interest and withdrawal at maturity are tax free.
Under the tax rules, NPS maturity amount enjoys tax benefits. There’s a Section 80C tax benefits up to Rs 1.5 Lakhs a year on NPS contribution. You have 60% of NPS corpus at maturity as tax-free. The remaining 40% is compulsorily locked into an annuity plan. Annuity payouts are taxed.
See Also: All You Must Know About Tax Planning
When you/employee exit an organization, the Company offers payment against leaves not availed. For private employees the leave encashment which you get up to Rs 3 Lakhs is tax-exempt. VRS is tax-exempt up to Rs 5 Lakhs.
Tax liability is computed only if these conditions are met.
See Also: How Does an Income Tax Calculator Work?
Gifts from some relatives are not taxed. Relatives are defined as:
These are relatives from whom the gifts got are not taxed.
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