As salaried individuals, most of us don’t have the luxury of taking up a second income to make enough money to alleviate tax losses and match our ambitions. A far better way to earn more is a careful analysis of your salary structure to reduce income tax payments to a minimum and correspondingly increase your net receivable salary.
7 Income Tax Tips for Salaried Individuals
- If your boss has been consistently refusing your requests for a pay raise even after you completed that hefty project, it might be time to talk to your HR department to change the structure of your salary. It is a well-established principle of taxation that expenses incurred to achieve a job goal ought not to be considered a part of taxable income. For instance, you might have to travel to meet a client, attend a business conference, call clients on your personal phone buy magazines or books to complete research on a project, HRA etc. All these are expenses that your employee should boot the bill for. Ask your reporting manager to lump a percentage of your basic salary to cover these work related expense heads. Perks and allowances are not taxable under various clauses of Section 10 of the Income Tax Act, 196However, some perks that are taxable include:
- City Compensatory allowance.
- Fixed Medical allowance.
- Allowances to cover expenses on food.
- Servant allowance.
- Dearness allowance.
- Overtime allowance.
- Telephone allowance.
- You can save up to Rupees 1,50,000 for investments under sections 80C, 80CCC and 80CCD. Typical investments under these sections include:
- Provident Fund payments.
- If a housing loan has been obtained from a recognised institution, then the principal borrowed under that loan (upto Rupees 2,00,000 annually).
- Investments in a Public Provident Fund scheme.
- Tuition fees of school-going children for up to 2 children.
- Life Insurance premiums if taken in the name of your spouse, children or your self.
- National Savings Certificate schemes of India Post.
- Sukanya Samriddhi Yojana account opened in the name of a female child.
- Section 80E allows you to deduct interest paid on an Education Loan (taken from an approved financial institution) for studying abroad from your taxable income. No limit to this amount has been specified. The principal amount of the monthly instalment, however, does not qualify for the same treatment.
- Medical insurance premiums if taken in the name of your spouse, children or self. The ceiling for this income tax deduction is Rupees 25,000. If parents over 60 years of age are also insured, you can avail an additional Rupees 25,000 as deduction.
- Agricultural Income is totally exempt from income tax according to Section 10 of Part III of the Act.
- Dividends received upon investing in long term equity shares or mutual funds. Long term means a period in excess of 12 months.
- If you just got married then there’s plenty of good news. The monetary value of gifts that you receive at the time of marriage are
These are just a few of the commonest ways you can save the money you pay as income tax and if you pay TDS then the amount can be claimed as income tax refund when you e file your ITRs online. There are occasions when your investments and sources of income are complex. In such a case, it is best to consult a tax expert, preferably through an affordable buy quality online platform.
This information is provided to you in the public interest courtesy of AllIndiaITR, a product of Corwhite Solutions Private Limited.