How to Save Income Tax for Salaried Employees

How to save Income Tax for Salaried Employees

The word "tax" causes bold men and women to shudder. Taxes are disliked by everyone. There are numerous strategies to reduce taxes on income. We specifically wrote this post for salaried individuals wishing to reduce their tax burden for FY 2021-22 (AY 2022-23)

10 Tax Saving Tips and Tricks for Salaried Individuals

Checking your pay slip gives you a clear picture of how your monthly salary is allocated (the break-up of your salary).The same details are included in your offer letter. With the help of this data, you may determine the correct income tax payment and file the appropriate investment declaration. The "Basic" is the first element you will notice. This is the money provided for keeping yourself, as the name implies. There is no tax deduction available for the "Basic" component.

Let's examine the breakdown (components) of your monthly salary that can be used to reduce your taxes.

1. House Rental Allowance (HRA)

You can utilize HRA to avoid paying taxes on your house rent if you live in a rental apartment or house that is far from your place of employment. You must be renting your home in order to qualify for this deduction, and your landlord must provide you with rent receipts and a legal copy of your rental agreement (notary or registered). The following exemptions apply to HRA:

• The HRA received from your employer
• The amount of rent you paid for the home 10% of your gross income (gross income includes allowances),
• 50% of your basic income (for a metro area), or 40% of your basic income (for non-metro).

Note: You will need to provide the landlord's PAN information if the rent exceeds Rs. 1 lakh.

 2. Leave Travel Allowance (LTA)

You can submit a claim for domestic travel expenditures under this component. This includes the cost of your family's and your own airline tickets. If your spouse and two children accompany you on a trip, you are not taxed on their travel costs. If your brother, sister, or parents are completely dependent on you, you can provide coverage for them.

Note: You have two opportunities to use this benefit within a block of four years. If you haven't filed a claim in the last four years, you can easily roll over one vacation into the following block as long as you use it in the block's initial year..

3. Income from Gratuity

The sum received at retirement is known as a gratuity. It is also given in an emergency, when someone becomes disabled, or when employment is terminated. In the event of death, dependents (spouse, kids and parents) will receive the gratuity. The income tax exemption for gratuities under Section 10(10)(iii) of the Income Tax Act, 1961 has been increased by the Ministry of Finance to Rs. 20 lakhs.

4. Food / Meal Coupons

You might request that your employer include food coupons in your monthly pay. Up to a monthly income of Rs.2600 food and meal coupons are not taxable.

5. Standard Deduction

For taxpayers, there is a basic deduction of Rs. 50,000 in place of medical reimbursement and travel expenses. Pensioners and those on salaries are not needed to provide any receipts or other paper working order to claim the standard deduction of Rs. 50,000. You can immediately make a claim.

6. Telephone /Internet Expenses

These fundamental costs are covered by the reimbursement portion of your compensation. These costs can be deducted by your business tax-free (the company does not recharge or pay your bills). Either you can claim tax advantages or get your phone expenditures repaid.

7. Voluntary Retirement Scheme

If you choose to retire voluntarily, the money you receive is not taxable (upper limit of Rs. 5 lakhs).

Note: Only those who work for government agencies or organizations that are under the purview of the federal or state governments are affected by this.

8. Medical Insurance

According to Section 80D of the Income Tax Act of 1961, a medical insurance coverage entitles you to a tax deduction.

Note: The allowance for medical insurance for oneself, one's spouse, and dependent children is Rs. 25,000; for parents over 60, it is Rs. 30,000 (up from Rs. 50,000). You can also get Rs. 5,000 to cover the expense of preventive health exams for you, your spouse, your kids, or your parents.

Best Tax Saving options under Section 80C

9. Equity Linked Savings Scheme

ELSS programmes offer two advantages. Over the course of the investment, you grow money and save tax. In contrast to the 8% returns from PPF, FD, NSC etc., the assets of an ELSS plan are predominantly invested in stocks, which have the potential to yield returns of close to 20% or greater. Up to Rs. 1.5 lakh per year invested in ELSS will result in tax savings. An additional advantage of an ELSS programme is the option to invest through a systematic investment plan (SIP).

10. Fixed Deposit With Tax Savings

This resembles a typical fixed deposit. The main distinction is that the money is deposited for a 5-year lock-in term. With a minimum deposit of between Rs. 8,000 and Rs. 10,000, a tax-saving fixed deposit can be formed. From 5.5 percent to 8 percent is the rate of return. With a tax-saving fixed deposit, you can save up to Rs. 1.5 lakh annually in taxes.

Conclusion

The list above is not all-inclusive. A variety of tax-saving investments are available. The numerous Sections of the Income Tax Act of 1961 include references to these distinct sorts of instruments. There are restrictions and prerequisites for each section. Before investing, make sure to carefully read all the fine print.

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