Income Tax Rules: According to income tax rules, tax can be saved if tax deductions and tax exemptions are used properly. However, for this you will have to keep your salary structure in such a way that the tax scope is not high. If you plan correctly and use all the exemptions and deductions properly, then surely you can save tax on a salary of up to Rs 12 lakh. In such a situation, you will not have to pay any tax on a salary of up to Rs 12 lakh.
Income Tax Saving Tips: If you start tax planning as soon as the year starts, then you can save a lot of tax. Sometimes the tax on your salary can also be zero. Even if your annual salary is Rs 12 lakh, you can avoid paying any tax by following some steps. This means that your income tax can be zero.
If you plan correctly and use all the exemptions and deductions properly, then surely you can save tax on a salary of up to Rs 12 lakh. For this, you will also have to keep your salary structure such that the scope of tax is not high. Usually, at the beginning of the year, there is an option to change the salary structure. You can decide how much money you want as reimbursement and how much as taxable salary. Reimbursement includes options like conveyance, LTA, food-coupon or entertainment, internet or phone bill and petrol.
Take full advantage of HRA
Apart from this, there is also an option of HRA for tax saving. For HRA, you will have to calculate 3 numbers and whichever is the lowest, you will get tax exemption on it.
1. The HRA given by the company in the salary can be claimed.
2. You can claim up to 50% of the basic salary in metro cities and up to 40% of the basic salary in non-metro cities.
3. You can claim HRA up to the amount that remains after deducting 10% of the basic salary from your total rent.
If your annual salary is Rs 12 lakh, then you should structure your salary in such a way that HRA is Rs 3.60 lakh, LTA is Rs 10,000 and telephone bill is Rs 6,000. You will get deductions on gross salary in this way-
- Standard deduction under section 16 – Rs 50,000
- Exemption from professional tax – Rs 2,500
- HRA under section 10 (13A) – Rs 3.60 lakh
- LTA under section 10 (5) – Rs 10,000
- If you add all the above items, now your taxable salary will be Rs 7 lakh 71 thousand 500 (7,71,500).
Further calculation will be like this:
- Under section 80C (LIC, PF, PPF, children’s tuition fees etc.) – Rs 1.50 lakh
- Under section 80CCD, National Pension Scheme (NPS) under Tier-1 – Rs 50,000
- Under 80D, health insurance for self, wife and children – Rs 25,000
- Exemption on health policy for parents (senior citizens) – Rs 50,000
Now the taxable salary will be less than Rs 5 lakh. If the taxable salary is less than Rs 5 lakh, then rebate and basic exemption will be available under section 87A. In this way, your tax will become zero. It is worth noting that this formula will work on the old tax regime.
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