How to save income tax: If you plan then you can save tax. Believe me, if the planning is right then there will be no tax on your income i.e. salary. Meaning zero tax.
How to save income tax: The new year has started. It is time for new financial planning. But before that, one should try to save tax for the current financial year. If you plan, you can save tax. Believe me, if the planning is right, then there will be no tax on your income i.e. salary. Meaning zero tax.
Take advantage of reimbursement
According to Income Tax rules, if Tax Deductions and Tax Exemptions are used properly, then tax can be saved. However, for this, you will also have to keep your salary structure such that the scope of tax is not high. Apart from this, you can take more benefit of reimbursement.
What to do to make tax zero?
Now the matter is that in order to avoid any tax on salary, investment and savings will have to be balanced properly. If your salary is Rs 12 lakh and you take full advantage of reimbursement and investment tools, then definitely there will be no tax on the salary. The entire salary will be received without tax.
Definitely change the salary structure
The option to change the salary structure is in your hands. You can also request this from the company HR. There is a limit on reimbursement. But, there can be multiple tools in it. Conveyance, LTA, entertainment, broadband bills, petrol bills and entertainment or food coupons can also be used in reimbursement. Tax can be saved with the help of all these. Apart from this, there is also an option of HRA to save tax.
Take advantage of HRA in this way
Three figures are included in claiming HRA. The lowest of these three will get tax exemption. The HRA given by the company in the salary structure is according to metro and non-metro cities. There is a relaxation to claim HRA up to 50% of the basic salary in metro cities and 40% of the basic salary in non-metro cities. The amount that remains after deducting 10 percent of the basic salary from the total rent can be claimed as HRA.
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How is HRA decided?
The rent in a metro city is Rs 20,000. That means 20% of your total monthly salary. Basic salary will be 50% of CTC. In this case, your basic salary is Rs 6 lakh. If you get HRA of about 40% of your basic salary from the company, then you will get HRA of about Rs 2.40 lakh annually. But, because you live in a metro city, you can take HRA up to 50% i.e. Rs 3 lakh. The annual rent at the rate of Rs 20,000 is Rs 2.40 lakh. After deducting 10% of the basic salary i.e. Rs 60,000 from this, the total HRA is Rs 1.80 lakh. Now, out of the three figures given above, Rs 1.80 lakh is the lowest. In this situation, you can claim Rs 1.80 lakh annually.
LTA- Benefit of Leave Travel Allowance
The benefit of LTA can be availed twice in 4 years. It includes the fare of the travel plan. This is 10% of your basic salary. On a basic salary of Rs 6 lakh, you will get Rs 60,000 as LTA. If we look at the annual average, tax exemption can be availed on Rs 30,000.
How to get the benefit of reimbursement?
1. Conveyance Allowance: People in the salary bracket of 12 lakhs usually get a reimbursement of 1-1.50 lakh rupees. This means that the conveyance allowance of 1.50 lakh rupees will be completely non-taxable.
2. Broadband Bill: Tax exemption can be available on broadband bills as well. Include it in the reimbursement. For this, you get an allowance of 700-1000 rupees every month. Let us assume that under this, you get 1000 rupees every month, which means 12000 rupees will be the non-taxable salary annually.
3. Entertainment Allowance: You can claim it by showing the bill of food and drinks in entertainment reimbursement. People with salary up to 12 lakhs will get 2000 rupees every month, that is, up to 24 thousand rupees will be non-taxable.
4. Uniform, books or petrol bills: Different companies give reimbursement in the name of uniform, petrol or books bills. You can also take up to Rs 1000-2000 in this category. By taking Rs 1000 as reimbursement every month, Rs 12,000 annually will come under the non-taxable category.
You will get Income tax deduction
There are some deductions available in the Income Tax Act, which help in reducing the taxable salary.
1- Basic income exemption: Salary up to Rs 2.5 lakh has been kept non-taxable in the Income Tax rules. This means that there will be no tax on any exemption up to Rs 2.5 lakh from your total salary. But, it is calculated at the end.
2. Standard deduction: First of all, you will get a standard deduction of Rs 50 thousand. This means that whatever your salary is, reduce it by Rs 50 thousand.
3- Section 80C: In this, you can get tax exemption on investment up to Rs 1.50 lakh. It includes tools like EPF, PPF, Sukanya Samriddhi Yojana, NPS, child’s tuition fees, LIC, home loan principal. You can claim a deduction of Rs 1.50 lakh by using its full limit.
3- Section 80CCD(1B): In this, you get the benefit of investing an additional Rs 50,000 in NPS.
4- Section 80D: In this, you can save tax up to Rs 25,000 by taking health insurance for yourself. Apart from this, you can also get tax exemption of up to Rs 25,000 on health insurance of parents. The total deduction in this can be up to Rs 50,000. If the parents are above 65 years of age, then the limit of senior citizen deduction will be Rs 50,000. In such a situation, you can save tax up to Rs 75,000. Currently, in 80D, you will be able to save tax on a total of Rs 50,000.
Understand the complete calculation of taxable and non-taxable
First HRA – In this, tax exemption of up to Rs 1.80 lakh will be available.
Second Reimbursement – If we add all the reimbursements, then a total reimbursement of Rs 1.98 lakh will be available.
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. Tax will not be levied on Rs 7.08 lakh from your total salary.
Income tax will be 0 on 12 lakh salary
The total annual salary is Rs 12 lakh. Out of this, tax will not be levied on Rs 7.08 lakh. Now the taxable salary left is Rs 4.92 lakh. Now another rule of income tax will come here. If the taxable salary is less than Rs 5 lakh, then rebate will be available under section 87A. There is a 5% tax on salary between Rs 2.5 lakh and Rs 5 lakh, but if the total taxable salary is less than Rs 5 lakh, then a rebate of Rs 12,500 will be given on Rs 2.5 lakh. After this, the remaining Rs 2.50 lakh will be kept under the purview of basic exemption. In this way, your entire salary will become tax free. In this way, all your taxes become zero.
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