In this World there’s nothing certain but death and taxes. Salaried citizens understand this saying well. If you are salaried and want to save tax, you must do tax planning. If you don’t, you will be paying all hard earned money to the tax department. In this article you will learn some simple ways for salaried people to save tax.
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1. Restructuring salary can save tax
You have many expenses just because of your job. Your job might require you to wear a uniform or you might have to entertain clients of the Company and spend money on them. Your job might force you to read magazines, books and newspapers. All these expenses are a part of your job and are incurred just because you work for this Company.
This is a forced expense which should be borne by the employer and not by you. These expenses are non-taxable, but the employer needs to mention it.
Ask your employer to restructure the salary and make sure you get perks and allowances for these expenses. Perks and allowances are not taxed, and you must show proof of expenses to get the tax-free allowances.
SEE ALSO: Submit Form 15G and Form 15H To Save Tax
House Rent Allowance
If you are living in a rented apartment, you can claim HRA (House Rent Allowance). Rental expenses can be deducted from taxable income. You get HRA as part of your salary.
This formula shows the HRA tax benefit
You must deduct the lowest of these from the gross income. The remaining amount is taxed.
Your Company could provide medical reimbursement up to Rs 15,000 a year, for medical expenses incurred for doctor’s consultation, medical tests and so on. You have to submit medical bills to the employer, to claim the medical reimbursement.
You get this allowance to meet travel/commuting expenses from home to office. The conveyance allowance component in your salary or Rs 1,600 a month, whichever is lower, can be availed as a tax deduction. Please note: Standard deduction was reintroduced in the Union Budget 2018-19. The standard deduction of Rs 40,000 a year will replace conveyance allowance and medical reimbursement.
SEE ALSO: How To Calculate Gratuity?
3. Popular Tax deductions for salaried to save tax
Section 80C: You get tax deductions under Section 80C for investments in PPF, ELSS, EPF, premiums paid on life insurance plans, NPS, home loan principal repayments, SCSS, NSC, Tax saving FD, Sukanya Samriddhi Scheme and some others, up to a maximum of Rs 1.5 Lakhs a year. Section 80C tax deduction, is for the sum total of all eligible investments up to a maximum of Rs 1.5 Lakhs a year.
Section 80D: You get this tax deduction on the premiums paid for health insurance plans for self + spouse + children. The maximum deduction for citizens under 60 years is Rs 25,000 a year. Senior citizens over 60 years, get a maximum tax benefit up to Rs 50,000 a year, on premiums paid for health insurance plans.
Section 80E: If you have availed an education loan and are repaying it, the EMI (Interest) is eligible for a tax deduction under Section 80E. This deduction is only for the interest part and not the Principal portion of the Education Loan.
Section 80G: You get this deduction for certain eligible donations. You can claim either 100% or 50% of the amount donated.
Home Loan Interest: You are eligible for a tax deduction on the home loan EMI (Interest) under Section 24, up to a maximum of Rs 2 Lakhs a year. First-time home buyers get an additional deduction on home loan interest, up to Rs 50,000 a year, under Section 80EE, subject to certain conditions. Be Wise, Get Rich.
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