Tax saving and Tax Planning are important aspects for the salaried person. As it allows you to save more money. If as a salaried person you are earning Rs 10 Lac per year, you have very little scope to avoid tax. At the most, you can invest in tax saving scheme and get a tax benefit of few thousand rupees.
In any case, you have to pay income taxes, but with little tax planning, you can optimize your tax outgo. So, here is Tax Saving Tips for a Salaried person to maximize tax saving.
Download Automated All in One for Govt& Non-Govt employees for F.Y.2016-17.
Feature of this Excel Utility :-
- Automatic Prepare Tax Compute Sheet
- Individual Salary Structure for Govt & Non-Govt Employees as per Govt & Non-Govt Employees Salary Pattern
- Automatic Individual Salary Sheet
- Automatic House Rent Exemption Calculation U/s 10(13A)
- Automatic Arrears Relief Calculation with Form 10E from F.Y.2001-02 to up to F.Y.2016-17
- Automated Form 16 Part A and B for F.Y. 2016-17
- Automated Form 16 Part B for F.Y. 2016-17
- All the updated Income Tax Section have in this Excel Utility as per Finance Bill 2016-17
How Salaried Person can maximize tax saving?
Income Tax Exemption for Salaried Person
The first thing you should do as a salaried person is to take maximum advantage of available tax exempted allowance/reimbursements. In order to take this benefit, you must be aware of such allowances. So, here is a detail of all applicable tax exempted allowances.
House Rent Allowance U/s 10(13A) [Download Automatic H.R.A. Calculator]
Most of the employer gives a benefit of HRA to their employees. Under House Rent allowance a minimum of a following is exempted from the income tax.
· Actual HRA
· Actual Rent Paid minus 10% of salary
· 50% of Basic for Metro City or 40% of Basic for Non-Metro City
House Rent Allowance U/s 80GG ( Who have not get H.R.A. from employer):-
Max limit Rs. 5000/- P.M. or 60 thousand P.A. from the F.Y.2016-17
Leave Travel Allowance
LTA or Leave Travel Allowance is given by the employer to their employee in order to reimburse the cost incurred on the vacation. This allowance is exempted from income of the salaried people provided employee actually goes on the vacation and produced the valid proof of travel. Two such trips in the block of four years are allowed under LTA. The amount payable should not exceed Economy Air Ticket or First class AC Rail Fare for the shortest distance to a single destination.
Leave Encashment
You must be getting several leaves in the year. In case if you don’t claim these leaves employer gives the option to encash these leaves. The amount received by a salaried person as a leave encashment can be claimed for tax exemption up to certain extent.
Travel and Fuel Reimbursement
Travel and Fuel Reimbursement allowance is also exempted from the tax up to some extent. Let us say If an employer provides you a car for the official purpose and employer also gives you fuel reimbursement you can avail tax exemption. You need to maintain the record that car is used for official purpose only. The maximum amount that can be exempted from tax via this allowance is Rs 2400 per month. If the small car less than 1600 CC is used amount exempted would be Rs 1800 per month.
Uniform Allowance U/s 10
Uniform allowance paid by your employer to you as a part of your salary is fully exempted from the tax. It should be uniform, not a civil dress.
Children Education Allowance U/s 10
Allowance namely children education allowance given by an employer to the salaried person is exempted from the income tax. The amount of exemption is very low it is Rs 1200 per year for maximum two children.
Medical Reimbursement U/s 10
Medical reimbursement is actual amount paid to an employee by an employer on producing bills of medical treatment availed. The maximum tax exemption limit for this medical bill reimbursement is Rs 15000 year.
Transport Allowance U/s 10
If you are getting transport allowance in your salary you can avail tax exemption benefit of the same. Transport allowance is given to meet the expense of traveling between your house and office. A maximum exemption limit for this allowance is Rs 1600 per month for general employee and Rs. 3200/- P.M. for Phy.disable persons.
Income Tax Saving Investment/Deductions
Apart from tax exemption in various allowances salaried person can also make an investment in various tax saving instrument and maximize tax saving. The list of various sections and tax saving investment option is given below.
Section 80 C
Under section 80 C you can make an investment up to 1.5 Lac and avail tax benefit. Some of the best tax saving investment options under 80 C are ELSS, PF,PPF,Sukanya Smariddhi Scheme etc. You can also claim home loan principal and children’s school fees under this section.
Section 80 CCD(2):-
Exemption amount which contributes to the employee’s New Pension Fund by the Employer [ This amount excluded the max Rs 1.5 Lakh U/s 80C
Section 80 CCD(1b):-
Additional amount exemption u/s 80CCD(1B) Max Rs. 50,000/- for New Pension Scheme.[ This amount also exempts out of Max Rs. 1.5 Lakh U/s 80C
Home Loan Interest U/s 24b:-
If you have taken a home loan, you can avail additional benefit up to 2 Lac on the interest component of the home loan under section 24 B.
Home Loan Interest U/s 80EE:-
Max Rs. 1.5 Lakh additional amount can get benefits for Home Loan Interest out of U/s 24B
Section 80 E
If you have taken education loan you can take benefit of income tax exemption on repayment of interest on the education loan. The entire amount paid for the interest on education loan can be claimed under this section.
Section 80 D Health Insurance U/s 80D
Health Insurance premium can bring you additional tax saving of Rs. 25000 per year under section 80 D. it includes health insurance premium payment of self, family, and parents. Along with this payment made for the preventive health checkup up to Rs 5000 can also be claimed as the tax deduction.
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