Salaried employees have always suffered both, the profits and losses of being employed. When it comes to paying tax, they are the first ones to feel the agony of losing out money. With expenditures of people mounting a ladder each passing year, it becomes difficult for them to dine out on weekends and manage their office travels or even those last minute medical expenses. However, the answers to bring down their tax bill are hidden in their salary slips.
While, the HR will not want to disclose these tax saving tricks to their employees, underneath are some of the amazing ways we have brought to you to give your tax a big push:
- Reshuffle your Gross Income
There are certain expenses which employees are bound make owing to their job responsibilities. If they leave the job, those expenses too come to an end. Such expenses are taxable and employees can ask for perks and allowances to compensate these expenses besides the salary. These expenses, if incurred rightly help employees to avail tax-free allowances. HR often does not inform employees about these expenses as to prevent themselves from paying tax.
Some of the allowances on which you can save tax include:
- Office travel
- Mobile & Telephone
- Books, Newspaper & Magazine
- On-site medical treatment
- Training expenses
Tip: The employer is the sole decision-maker in providing these allowances to the eligible employees. Remember, the monthly tax paid every month is also eligible for tax deduction.
- “Invest & Save Tax” – Under Section 80C
Under Section 80C, employees can receive a tax exemption of up to Rs. 1,50,000, if they invest their savings in any of the funding options mentioned beneath:
- PPF or Public Provident Fund
- LIC or Lifestyles Insurance Premium
- Equity Linked Savings Scheme
- Coaching Expenses for children’s education maximum with two kids
- 5-year Fixed Deposits with Banks
- Countrywide Financial Savings Certificate
Tip: Do not forget to keep the receipts of any investment that you may choose to make from the above listed investment options.
- HRA (House Rent Allowance)
Under section 80GG, employee can claim for HRA if he/she stays in a rented flat by showing the receipts, yearly or quarterly, whatever is the requirement of the employer.
Deduct the lowest of the following from your gross income:
- Actual HRA by the employer
- 50% of the basic salary plus DA if employee resides in Mumbai, Delhi, Chennai & Kolkata. Else, 40% of basic + DA.
- 10% of basic income + DA subtracted from the actual house rent paid by the employee.
HR Tip: If an employee’s total rent expense is not more than 1 lakh, he or she may claim to get tax exemption on the above.
- Leave Travel Allowance
Holidays mean larger expenses than usual. If a salaried employee takes a tour, most companies grant them with LTA or Leave Travel Allowance as a component of salary package. Sometimes, HR does not even let the employees know about it. However, as a salaried employee, you can claim a tax deduction on your travel expenses incurred on travel during a year. Whether it is a travel by rail, road or air, with certain terms and conditions applicable, you can certainly make the most of this tax benefit.
Tip: Ensure you read all the terms and conditions associated with the allowance.
- Tax Saving Fixed Deposit
Tax Saving Fixed Deposit is a unique kind of investment which an employee can do in any bank he or she is associated with. With a condition of money being locked for 5 years, the interest earned over the amount is subject to tax benefit.
Tip: Keep a secondary savings account always as a backup in case of emergencies so that you are not compelled to liquidate your tax saving fixed deposit.
- Medical Insurance
Life is never certain and taking a Medical Insurance can always help in saving those last minute expenses, which become unaffordable to pay. Premium for Medical Insurance is taxable, where in employees can make the maximum benefit. The deduction of over and above 1.5 lakh can be exempted from tax if the proofs you, as a salaried employee takes health insurance of:
- Up to Rs 25,000 for self and family. Checkups of Rs. 5000 also included.
- Up to Rs 25,000 for parents, if they are above 60 years, the limit extends up to 30,000.
Tip: This year, do not just invest in your self-insurance, but also in your family’s insurance to save maximum on your tax bill.
This scheme allows you to invest in a range of options with choice of pension manager who would manage your finances. With NPS, the deduction of Rs. 50,000 can help you if you fall in the highest tax bracket of 30 %. Employees in 20% tax bracket can save more than Rs. 10,000 and those coming under 10 % bracket can save up to Rs. 5,000.
Invest some time in taking stock of your tax savings. It would wise if you evaluate your income, as well as, expenses in the beginning so as to unload yourself from paying heavy tax at the end of the financial year. If you or your HR has missed to tell you about the tax benefits you may claim, then reading the above blog will provide you highlights about the lately released budget and make better financial plans in the year ahead.
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