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Income Tax Savings: Want to save tax and cannot think of anything else. With the increase in salary, the tax burden is also increasing. In such a situation, what should be the solution so that the salary does not come under the tax net or the entire tax is saved? So now is the time to make your financial plan. Planning plays an important role in tax saving. Believe me, if the planning is correct then there will be no tax on your earnings i.e. salary. That means zero tax. Let us know how.
avail reimbursement
According to income tax rules, if tax deductions and tax exemptions are used properly, tax can be saved. However, for this you will have to keep your salary structure in such a way that the tax scope is not high. Apart from this, you can also avail more benefits from reimbursement.
0 What needs to be done for TAX?
Now the thing is that to avoid any kind of tax on salary, there has to be a balance between investment and savings. If your salary is Rs 12 lakh and you take full advantage of reimbursement and investment instruments, then definitely there will be no tax on the salary. Full salary will be received without tax.
What should be kept in the salary structure?
The option of changing the salary structure remains in your hands. You can also request for this from company HR. There is a limit on reimbursement. But, it may contain multiple devices. Conveyance, LTA, entertainment, broadband bills, petrol bills and entertainment or food coupons can also be used in reimbursement. With the help of all this, tax can be saved. Apart from this, there is also the option of HRA to save tax.
LTA- Leave Travel Allowance
LTA benefit can be availed twice in 4 years. This also includes the travel plan fare. This is 10 percent of your basic salary. LTA of Rs 60 thousand will be available on basic salary of Rs 6 lakh. If we look at the annual average, tax exemption of Rs 30 thousand can be availed.
This is how you get benefit in HRA
There are three figures involved in claiming HRA. Tax exemption will be given on the one which is lowest among these three. In the salary structure, HRA given by the company is according to metro and non-metro cities. There is an exemption to claim HRA up to 50% of the basic salary in a metro city and 40% of the basic salary in a non-metro city. The amount that remains after deducting 10 percent of the basic salary from the total rent can be claimed as HRA.
How will your HRA be decided?
The fare in Metro City is Rs 20 thousand. Meaning 20 percent of your total monthly salary. Basic pay will be 50 percent of CTC. In this case your basic amount is Rs 6 lakh. If you get HRA of about 40 percent of the basic salary from the company, then you will get HRA of about Rs 2.40 lakh annually. But, since you live in a metro city, you can take HRA up to 50 percent i.e. up to Rs 3 lakh. At the rate of Rs 20 thousand, the annual rent was Rs 2.40 lakh. After deducting 10 percent of basic salary i.e. Rs 60 thousand, the total HRA became Rs 1.80 lakh. Now Rs 1.80 lakh is the lowest among the three figures given above. In such a situation, you can claim Rs 1.80 lakh annually.
How to get the benefit of reimbursement?
1. Conveyance Allowance: People in the salary bracket of Rs 12 lakh usually get a reimbursement of Rs 1-1.50 lakh. Meaning, conveyance allowance of Rs 1.50 lakh will be completely non-taxable.
2. Broadband Bill: Tax exemption can also be available on broadband bill. Include this in the reimbursement. For this, an allowance of Rs 700-1000 is given every month. Suppose under this you get Rs 1000 every month i.e. your annual non-taxable salary will be Rs 12000.
3. Entertainment Allowance: In entertainment reimbursement, you can claim it by showing the food bill. Those with salary up to Rs 12 lakh will not have to pay tax up to Rs 2000 i.e. Rs 24 thousand every month.
4. Uniform, books or petrol bills: Different companies give reimbursement in the name of bills for uniform, petrol or books. In this category also you can take Rs 1000-2000. Taking a reimbursement of Rs 1,000 every month will bring Rs 12,000 annually into the non-taxable category.
You will definitely get exemption in income tax
There are certain deductions available in the Income Tax Act, which help in reducing the taxable salary.
1- Rebate on basic income: Under income tax rules, salary up to Rs 2.5 lakh has been kept non-taxable. Meaning, there will be no exemption tax on your total salary up to Rs 2.5 lakh. But, it is calculated in the end.
2. Standard Deduction: First of all, standard deduction of Rs 50 thousand will be available. Meaning, whatever your salary is, subtract Rs 50 thousand from it.
3- Section 80C: In this you can get tax exemption on investment up to Rs 1.50 lakh. This includes instruments like EPF, PPF, Sukanya Samriddhi Yojana, NPS, child's tuition fees, LIC, home loan principal etc. You can claim a deduction of Rs 1.50 lakh using its full limit.
3- Section 80CCD(1B): In this, one gets the benefit of investing additional Rs 50 thousand in NPS.
4- Section 80D: In this, you can save tax up to Rs 25 thousand by taking health insurance for yourself. Apart from this, you can also avail tax exemption up to Rs 25,000 on health insurance of parents. The total deduction in this can be up to Rs 50 thousand. If the age of the parents is more than 65 years, then the limit of senior citizen deduction will be Rs 50 thousand. In such a situation, you can save tax up to Rs 75 thousand. At present you will be able to save tax on a total of Rs 50 thousand in 80D.
Now understand the complete calculation of taxable and non-taxable.
First HRA- In this, tax exemption up to Rs 1.80 lakh will be available.
Second reimbursement- If you add all the reimbursements together, you will get a total reimbursement of Rs 1.98 lakh.
Third deduction – A total deduction of Rs 3 lakh will be available.
Fourth Leave Travel Allowance (LTA)- Tax exemption of Rs 30 thousand will be available. There will be no tax on Rs 7.08 lakh from your total salary.
Now TAX will be 0
The total annual salary is Rs 12 lakh. Of this, no tax will be levied on Rs 7.08 lakh. Now the taxable salary is Rs 4.92 lakh. Now another rule of income tax is going to come here. If taxable salary is less than Rs 5 lakh then you will get exemption under section 87A. Salary between Rs 2.5 to Rs 5 lakh is taxed at 5 percent, but if the total taxable salary is less than Rs 5 lakh, then a rebate of Rs 12,500 will be available on Rs 2.5 lakh. After this, the remaining Rs 2.50 lakh will be kept under the basic exemption limit. In this way your entire salary will be tax free. In this way your entire tax becomes zero (0).