TAX is the keyword these days on everyone’s mind. Be it tax-saving or tax filing or tax slabs etc., it is the tax saga all around. If you are a regular salaried employee, the tax is much more comprehensive. Your salary has various components which have their own pros and cons with respect to tax. If you understand your salary structure well, you can save a great deal on your taxes. Let us understand these components;
HRA is House Rent Allowance which is a considerable component of your salary can be claimed for exemptions or deductions. This for people who live in Rented accommodation.
LTA is Leave Travel Allowance. Domestic traveling is eligible to be claimed for exemptions under LTA. Shortest distance travel with spouse, children, and parents can only be claimed under this segment. Bills need to be produced in order to do so.
3. PROVIDENT FUND
Both the employer and employee make contributions to the provident fund of an employee. It amounts to 122% of the basic salary. The government regulates provident fund and upon maturity, the gains on the provident fund are tax-free. Also, the contributions made towards EPF can also be claimed for exemption under 80C.
4. STANDARD DEDUCTION
The standard deduction part got reintroduced in the budget, 2018. The employees are now allowed to claim Rs. 50,000 flat as the standard deduction for medical and conveyance allowance combined. This limit was Rs. 40,000 earlier.
5. PROFESSIONAL TAX
Professional tax is a charge levied by the employer and deposited to the state government. It is a fixed amount of Rs. 2500. The employee can claim this as a deduction.
6. LEAVE ENCASHMENT EXEMPTION
This feature varies with different companies. While some of them may allow you to carry forward a part of your unused leaves, others may have a mandate of utilizing them within the same year.
7. SECTION 89(1) EXEMPTION
Any arrear or advance received in salary is tax exempted or allowed tax relief.
8. EXEMPTION IN CASE OF VRS
If you are someone who has or is planning to opt for voluntary retirement, then any funds or compensation received on VRS is tax exempted. The maximum allowed limit for the compensation receipt is Rs. 5,00,000 and should comply under the rule 2BA.
The pension is a salary and hence taxable.
The employer pays the employee a benefit for rendering services for 5 years and more called gratuity. However, this benefit is paid at the time of resignation or retirement.
11. DONATION TOWARDS POLITICAL PARTY
If you have made any donation towards any political party in India, then under section 80GGC, your contribution is tax exempted.
12. MEAL COUPONS
Benefits can also be provided in the form of meal coupons like Zeta or Sodexo. A maximum of Rs. 2600 per month is permissible.
13. EMPLOYER LEASED CAR
A lot of organizations give their employees the benefit of leasing car till the employment lasts. Hence, the employee does not need to buy a car and be saved from monthly EMIs and hence the taxes on them.
14. PHONE AND INTERNET BILL
Telephone and internet bills are usually covered by the employer. They may either be pre-paid or reimbursed and hence claimed for benefits.
The tax rate applicable is directly proportional to the income you have. the more is the taxable income, the is the tax liability. Hence it is very important to consider all the available option to invest your money into. There are a lot of choices to be made under the Section 80C list. All of the options come with deductions and exemptions whichever is applicable. You can save up to Rs. 1,50,000 per year by making such investments. Some of the options are: fixed deposits, Insurance policies, Equity Linked Savings Scheme (ELSS) etc. ( https://www.piggy.co.in/elss/ )
Before you do the filing, make sure you consider all the available options to save the maximum out of your hard-earned salary.
Start Investing, Stay Invested!