How Salaried Individuals Can Maximize Their Take Home Salary
A big shout to all the salaried individuals !!
We value every bit of your effort put in your work front and truly care for your hard-earned money. We're here to discuss different possible channels, which will aid in lowering your tax outgo on salary income. There are numerous alternatives available for investment which will help us save taxes. It is important to understand which one will work for us. Investing smart is the mantra!!
How a salaried individual can save the income tax
✔️ Take good note of the section 80C
Come the Income Tax filing season and the entire salaried masses turn out to be frenzy about taxes for the said financial year. Taxes are levied on individuals falling under different tax slabs. Section 80C of the income tax act provides one with an array of options for individuals to lower their tax liability.
✔️ List the most important options
Most appropriate options like Insurance, Public Provident Fund, Employee Provident Fund, and tax-paying funds, National Saving Certificate help you allocate resources towards tax saving options. The investment options depend primarily on financial goals, income levels, and risk profiles. Start with Rs1,50,000 tax-saving investments from initial stage.
✔️ House Rent Allowance
You can claim your house rent allowance or HRA if you live in a rented apartment. A tax exemption can be obtained partially or completely under HRA. HRA is computed by the employers in a manner prescribed by Income Tax Laws, which can be claimed by the salaried individuals.
Note*- If you receive HRA and don't stay in a rented apartment, then HRA amount will taxable.
✔️ Leave Travel Allowance
You will get a tax exemption under the leave travel allowance. You can claim this allowance on your trip within India, with your spouse, children, and parents, but not with other relatives. Only if you are visiting a short distance within India, this exemption can be claimed. Only if you actually take the trip and incur expenses, this tax benefit cannot be claimed. You will have to submit the bills to your employer as proof to claim the exemption.
✔️ Standard Deduction
In the 2018 budget Standard Deduction was reintroduced. This is a replacement of Conveyance Allowance and Medical Allowance. An employee now can claim a deduction from the total income to the amount of Rs 50,000. The limit of exemption was earlier limited to Rs 40,000 prior to Budget 2019.
You can call it with the name of performance incentive, bonus, or profit-sharing, this is 100% taxable. Based on the company policy, the performance is based on your individual ratings.
✔️ Professional Tax
Every individual who is earning an income is directed to pay the professional tax. This is a tax levied by the state government on every individual who earns a living through any medium. Every state has a different basis of calculation on the amount collected from the individual. However, Rs 2,500 is the maximum limit set by state government that can be levied on individuals.
✔️ Meal Coupons
Meal coupons like Sodexo are not chargeable up to Rs 2,300. The employer can issue meal coupons, considering 2 meals per day for 23 average working days in a month which will be exempted from tax.
✔️ Daily Travel Allowance
Tax exemption of Rs 1600 can be claimed on your daily travel allowance received from the company. The good news is you do not have to submit any bills or profit to avail tax benefit.
✔️ Company Leased Car
Some companies provide the facility of car lease policy. You can drive a company leased car and save tax on car EMI and fuel. The company will deduct the EMI amount of car being paid to the leaser. You can claim the reimbursement of fuels, repairs and maintenance expenses from the employer which are tax-free.
✔️ Income from Gratuity
If an employee gets retired or incapacitated or terminated, or any gratuity received by the spouse, children or dependants on his death is exempt from tax subject to certain conditions.
In a lifetime an individual can claim Rs 10,00,000 as the maximum amount of exemption.
✔️ Buying Health Insurance
Under section 80D, an amount of Rs 25,000 as tax deduction which is available for insurance of self, spouse and dependent children.
You can claim an additional deduction for insurance of parents, which is available for Rs 25,000 if the parents are up to the age of 60 and Rs 50,000 if the parents are more than the age of 60years.
✔️ Interest on Saving
Under Section 80TTA you can claim tax exemption up to Rs.10,000 in the savings account.
✔️ Deduction on Home loan
An amount of Rs 2 lakhs as a tax deduction for interest on a home loan can be claimed by homeowners for the self-occupied property. Deduction for entire interest on the home loan can be claimed for the let out property.