ITR Filing: If you use every investment and reimbursement to the maximum extent, then it is possible that you can get tax exemption on a salary of up to Rs 12 lakh. However, through this it is necessary that you choose the old tax slab. Let’s understand how it works.
ITR Filing: The last date for filing income tax return is fast approaching. People who have tax liability are thinking that if they had planned a little earlier, then the benefit would have been less tax or no tax would have been deducted. If you start tax planning as soon as the year begins, then you can save a lot of tax. Sometimes the tax on your salary can also be zero. If you use every investment and reimbursement to the maximum extent, then it is possible that you can get tax exemption on a salary of up to Rs 12 lakh. However, through this it is necessary that you choose the old tax slab. Let’s understand how it works.
First of all, work on your salary structure
At the beginning of the year, there is often an option to change the salary structure. You can decide for yourself how much money you want in reimbursement and how much money as taxable salary. Reimbursement includes options like conveyance, LTA, food-coupon or entertainment, internet or phone bill and petrol. HRA plays an important role in saving tax. Let us know how you can save your tax with the help of all these.
Take full advantage of HRA
When you are claiming HRA, you have to take out 3 types of figures. Whichever figure is the lowest among them, you get tax exemption on it.
1- The HRA given by the company in the salary can be claimed.
2- You can claim HRA up to 50 percent of the basic salary in metro cities and up to 40 percent of the basic salary in non-metro cities.
3- You can claim HRA up to the amount that remains after deducting 10% of your basic salary from your total rent.
If you live in a metro city, then it is common to have a house rent of Rs 15-20 thousand in today’s time. Let’s assume that your house rent is Rs 20 thousand, which is about 20 percent of your monthly salary. At the same time, the basic salary is about 50 percent of your CTC, so let’s assume that your basic salary is about Rs 7 lakh. In such a situation, in the 3 situations mentioned above, your HRA will be something like this.
1- Usually, about 40 percent of the basic salary is given HRA by the company. That means you will get HRA of about Rs 2.4 lakh.
2- Due to living in a metro city, you can take HRA up to 50 percent i.e. Rs 3 lakh.
3- As per Rs 20 thousand, your annual rent is about Rs 2.4 lakh. After deducting 10% of the basic salary i.e. Rs 60,000 from this, your amount comes to Rs 1.8 lakh.
Now, if we see, Rs 1.8 lakh is the lowest among these three figures, so you can get exemption under HRA on this amount.
Reduce the cost of travelling with Leave Travel Allowance
You can take advantage of this twice in 4 years. Under this, you can go somewhere for a trip and you can get the benefit of Leave Travel Allowance on the fare of coming and going. Usually, companies give about 10% of the basic salary as Leave Travel Allowance. Now if your basic salary is Rs 6 lakh, then you will get a Leave Travel Allowance of about Rs 60,000. If you calculate the average on an annual basis, then you will get tax exemption on about Rs 30,000. If Leave Travel Allowance is not included in your salary, then get it included, so that you can take advantage of it. Remember, if you fall in the 30% slab, you can save a lot of money with the help of LTA. It would not be wrong to say that your travel tickets will be 30% cheaper with the help of LTA.
Make sure to get reimbursement
Many things are given to employees by many companies as reimbursement. Let’s know about everything one by one and understand how much money you can save.
Conveyance Reimbursement: Under this, you can usually get a reimbursement of up to Rs 1-1.5 lakh from the company. Let’s assume that your company gives you a conveyance reimbursement of Rs 1.5 lakh, then this much money will become non-taxable for you.
Internet Bill: Nowadays, almost every business needs internet broadband. You can get a good speed internet broadband for Rs 700-1000 per month. In such a situation, the company also gives almost the same amount in reimbursement. If this component is not in your salary, then include it in the salary and get tax exemption. Let’s assume that under this, you can make Rs 1000 per month i.e. up to Rs 12000 annually non-taxable.
Food or Entertainment Reimbursement: Earlier this reimbursement used to be given in the form of food coupons, which you can now get in exchange by showing your food bill. Under this, the company usually gives around 2000 rupees per month i.e. 24 thousand rupees annually.
Uniform, fuel, books and others: Different companies also give some reimbursement in the name of uniform, fuel, books, magazines, papers etc. Talk to the HR of your company once and ask if these facilities are available there. If you get these reimbursements, then you will be able to save tax on some more money. Generally, by combining all these, you can get a reimbursement of up to 1000-2000 rupees. Let’s assume that you get only 1000 rupees per month as reimbursement, even then you will get the benefit of not paying tax on 12 thousand rupees annually.
You also get many deductions
Under the Income Tax Act, you also get some deductions which prove helpful in reducing your taxable salary.
1- First of all, every employed person gets a standard deduction of Rs 50,000. This means that whatever your salary is, you can blindly deduct Rs 50,000 from it.
2- The second biggest deduction is available under 80C, under which you can get tax exemption on investment up to Rs 1.5 lakh. This includes PPF, Sukanya Samriddhi Yojana, NPS, child’s tuition fees, life insurance premium etc. Let’s assume that you use this entire limit and claim a deduction of up to Rs 1.5 lakh.
3- After this, under 80CCD(1B), you get the benefit of investing an additional Rs 50,000 in NPS. So you can save some additional tax while securing your future.
4- In today’s time, everyone takes health insurance. Under section 80D, you can save tax up to Rs 25,000 by taking health insurance for yourself. Also, by taking health insurance for parents, you will be able to save tax on Rs 25,000. That is, your total deduction under this can be up to Rs 50,000. If your parents are above 65 years of age, then you will get a deduction of Rs 50,000 for them. In such a situation, you will be able to save tax up to Rs 75,000. For now, let us assume that you will be able to save tax on a total of Rs 50,000 under 80D.
Now understand the calculation
There are a total of 4 parts of this calculation. The first is HRA, under which you will get tax exemption up to Rs 1.80 lakh. The second part is reimbursement. If you add all the reimbursements mentioned above, then you can get a total reimbursement of Rs 1.98 lakh. At the same time, the third part is deduction. If you add the deductions available under all the sections, then you will get a total deduction of Rs 3 lakh. Apart from this, the fourth part is Leave Travel Allowance, on which you can avail the benefit only twice in 4 years. So if you calculate the average on an annual basis, you will get tax exemption on about Rs 30,000. That means, out of your salary, Rs 7.08 lakh will not be taxed directly.
Your annual salary was Rs 12 lakh, out of which Rs 7.13 lakh will not be taxed. In this case, your taxable salary is saved to Rs 4.92 lakh. Your taxable salary is less than Rs 5 lakh, so you will also get rebate on it under 87A. Let us tell you that no one has to pay tax on salary up to Rs 2.5 lakh, while 5 percent tax is levied on salary from Rs 2.5 to 5 lakh, but if your total taxable salary is 5 lakh or less, then the government gives you rebate up to Rs 2.5 lakh, that means you do not have to pay tax up to Rs 12,500. In this way all your tax becomes zero. Now your taxable salary is Rs 4.92 lakh, which is less than Rs 5 lakh, so you will also get the benefit of this rebate and your tax liability will become zero.
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