Income tax is the bitter reality that every salaried employee who falls in the taxable bracket has to swallow, it has to be paid. As the filing season closes by, every salaried class person gets anxious about the payable taxes he/she must take out for that financial year. The only question that is on everybody’s mind is, ‘How to lower down the tax outgo on the earned salary? ’
As per the government regulations, there are various tax saving opportunities, which when utilized in the right manner can cut a big chunk out of one’s tax outgo. The common sections of the tax act that can be utilized by the salaried employees to save on taxes are 80C, 80D, 80CCD (1B) and 24 (b).In order to do so, one should know their Pay Slips well and every component of it. The salaried employee should also have a sound understanding of their tax slab and should make wise and timely investment accordingly so as to minimize the impact of taxation on their salary.
Income Tax Rates for taxpayers less than 60 years of age in FY 2018-19
|Payroll Tax Slab||Ta Slab for FY 2018-19|
|Up to Rs 2,50,000||No tax|
|Rs 2,50,000 – Rs 5,00,000||5%|
|Rs 5,00,000 – Rs 10,00,000||20%|
|Rs 10,00,000 and beyond||30%|
Ways to minimize the tax outgo on your salary
HRA – the most significant part of one’s pay slip, as per the Indian Income Tax Act, is tax exempted. If an employee stays in a rented house, he can claim tax benefits on his HRA. This tax benefit can be claimed by filling out the rent details in the form 12BB at the end of the financial year and submitting the rent receipts along with it.
The gratuity pay that is received on separation from the corporate you are working with (can be due to retirement, becoming incapacitated, on termination or voluntarily leaving the job) is exempted from tax. The maximum exemption allowed per employee, on gratuity pay is INR 3,50,000.
If you receive meal coupons from your employer as part of your payroll, these meal coupons are exempted from tax up to an amount of INR 2600 per month.
You should always save your telephone/internet bill payment receipts as it can help you later on. You can either get your telephone expenses reimbursed by your employer and if your company does not reimburses such expenses you can claim tax benefits on it.
You can claim tax benefits on the interest payment of your home loan under section 24 of the Indian tax act,1961. The limit of deduction for home loan interest payment on your taxable income is INR 2,00,000.
Benefits of tax saving on the second home loan: As per the tax act, if you get another home loan for a new house, while your first home loan is still running, there is no tax deduction limit on the interest paid for that second home loan.
Certain investments that come under section 80C deductions give you tax rebate on your income. Whatever amount is invested by you is deducted from your taxable income. The maximum limit for 80C deduction is INR 1,50,000.
List of investments that come under section 80C
You should always follow the statutory HR policies to get tax deduction benefits. No fraudulent ways should be acquired.