Income tax is an unavoidable part of our lives. While many of us often harbour a wish to not pay the tax on income, it’s not the right thought. Not only would we derive the government of funds to utilize for public use but commit a criminal offense as well.
We can, however, minimise the impact of the income tax levied. With smart tweaks to our salary structure and timely investments into tax-saving plans, our take-home salary will remain solid and the worry of tax on income eating into our finances will all but disappear. Here’s how.
Avail Your HRA Benefits
HRA which stands for House Rent Allowance. Salaried individuals can claim this allowance to lower their tax liability under Section (13A) of the Income Tax Act; provided the individual stays in a rented accommodation. The HRA calculation depends on the following points:
- Actual HRA received.
- Rent Paid – 10% of Basic.
- 50% of basic if employee lives in a metro (40% for non-metro city).
The least of the above is considered from tax deduction.
Take in LTA
With Leave and Travel Allowance (LTA), companies reimburse you for travel. Submit travels bills up to the limit on your salary package and the employer will reimburse you. Under Section 10(5) of Income Tax Act, when you file this return, the allowance is tax-exempt. Keep in mind, LTA is eligible for travel within India and is eligible for claims only twice in a four-year period.
Section 80C Is Your Friend.
When you invest in investment plans, you do so to create wealth via returns and tax benefits. Invest in ULIPs, ELSS, PPF, NSC to gain tax benefits under Section 80C of Income Tax Act. And most important, your life insurance premiums too come to this benefit. Maximum deductions permitted are up to INR 1.5 lakh.
So is Section 80D
While all investments into finance products go under the above section, Section 80D provides you the option to claim deductions on premiums you’ve paid for health insurance plans. INR 25,000 is the maximum limit. If you pay for premiums for your parent’s health policies, you can claim up to INR 30,000.
National Pension Scheme (NPS) is another excellent tool to ensure you are left with a tidy take away sum after tax deductions. Under Section 80CCD(2), you can claim a deduction if your employer makes payments to your NPS account. The limit is 10% of your salary.
These five steps are what you need to ensure your take-away salary remains as high as possible after filing your returns.