As soon as the filing season begins, salaried class are frenzy about taxes they must pay for the said financial year. It is important to understand tax slab and what each of salary breakup component means. This can help to figure out how to save on taxes. Here are the important things to understand.
Standard Deduction: Salaried person are given a standard deduction of Rs. 40,000/- from their salary income irrespective of their salary per annum.
House Rent Allowance: This allowance can be claimed by those individuals who live in rented house. This can be partially or completely exempted from tax. Method for computing HRA is given in the income tax act that can be claimed as exemption. Also note that, if you received HRA and don’t live on rent, then it is fully taxable.
Leave Travel Allowance (LTA): Salaried employees can avail exemption for a travelling expenses, i.e., travel fare within India under LTA if the same is reimbursed by the employer. This allowance can only be claimed for a trip taken with your spouse, children, and parents, but not with other relatives. This particular exemption is up to the actual expenses, therefore unless you actually take the trip and incur these expenses, you cannot claim it. It can be avail only 2 times in block of 4 years. Submit the bills to your employer to claim this exemption.
Professional Tax: In our income tax return, professional tax is allowed as a deduction from our salary income. It is usually deducted by the employer and deposited with the state government. The maximum amount of professional tax that can be levied by a state is Rs. 2,500.
Food Allowance: The amount given as food allowance upto Approx. Rs. 15000/-per annum is non-taxable in the hands of employees.
Donation to Political Parties U/s 80GGC: Any Donation made to political parties is exempt from tax if it satisfies certain conditions.
Donation to Charitable Trust u/s 80G: Any donation made to registered charitable trust by cheque is exempt upto 50% of donation amount from tax if it satisfies certain conditions.
Interest On Housing Loan: Under Section 24 of the Income Tax Act, an individual can claim tax deduction of the interest payment on the housing loan up to a maximum amount of Rs. 2,00,000.
Deduction u/s 80C: Following expenses are claimed as exemption u/s 80C. Maximum amount which can be claimed as deduction for the following expenses is Rs. 1,50,000/- per annum.
- Tuition fees of school or college
- Life Insurance premium
- National Saving certificate and Kisan Vikas Patra
- Employee Linked Saving Scheme
- Principal Repayment Towards Housing Loan
- Sukanya Samridhhi Scheme (It is only for those who has girl child)
- Public Provident Fund
- Statutory Provident fund
- Stamp duty and registration charges of house purchase, etc.
NPS: An individual can avail an exemption of Rs.50,000 if he invested in National Pension Scheme under section 80CCD regardless to the deduction of 1,50,000 in 80C.
Mediclaim u/s 80D: This deduction can be avail by an assesse upto Rs.25000 for his family. However, if any of the parents covered by the mediclaim policy is a senior citizen, then the deduction amount is increased to Rs. 30,000.
Education Loan u/s 80E: The deduction allowed is the total interest part of the EMI paid during the financial year. There is no limit on the maximum amount that is allowed as deduction. You, however, need to obtain a certificate from your Bank.
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