How to Save Taxes for Salaried Individuals?

24 May 2021|

2 min read |

by ICICI Securities Team

When people think of tax savings, they usually think of Section 80C benefits, which can total up to Rs. 1.5 lakh in a fiscal year, and many people will stop there. There are, however, other ways to assert tax advantages and lower your yearly income tax bill.

Most salaried peHere are some of the tax-saving options for salaried:

Medical bills:

ople receive Rs. 15,000 in medical reimbursements as part of their cost-to-company (CTC). You may avoid paying tax on this amount by sending doctor consultations, prescription bills, and bills produced for diagnostics and tests. Remember to submit the bills to your employer on time since your employers can only claim this tax benefit.

Conveyance allowance:

You should arrange for your salary in such a way that your employer pays for your transportation. If the costs get incurred for official duties, the company compensates the employees for their car expenses. When an employee owns a car, the income tax liability gets determined because of private, official, or both. If the car's cubic capacity is less than 1,600CC, expenses for using the car are calculated at Rs. 1,800 per month or Rs. 21,600 per year.

Rent payment:

If you pay to rent and live-in rental housing, you might be eligible for HRA. HRAs may be tax-free in whole or in part. If you do not live in rental housing but receive a house rent allowance, the money is completely taxable. If you live with your parents and pay the rent, you can get an HRA exemption. Your parents, on the other hand, must report this rental income on their tax return.

If you could not send rent receipts to your employer on time, do not worry; you will seek HRA exemption while filing your tax return. Remember to save your rent receipts and keep track of any deductions you have made against your rent.

It is always a better idea to start preparing for tax saving early in the year rather than waiting until the last minute.

Food coupons:

Some employers now provide food vouchers in their pay packages, which are tax-free up to Rs. 55 per day. It can be claimed once a month for approximately 22 working days and up to two meals a day, totalling Rs. 26,400 per year.

Leave travel allowance:

LTA (Leave Travel Allowance) is a tax-free allowance that can be used to save money on airfare for trips within India. LTA is not a necessary advantage. Your salary structure, which may or may not include LTA, is determined by your boss. On the LTA, the fare for the shortest distance between two points is called an exception. The shortest route from the starting point to the farthest point reached is permitted. In air travel, the exemption does not exceed the cost of Air India's economy fare on the shortest route to the destination. This tax benefit is only available via your employer, so make sure you send your LTA bills on time.

Section 80C deduction:

For those in the 30% tax band, claiming the entire Rs 1.5 lakh deduction available under section 80C will reduce your tax bill by Rs. 45,000, except the cess. Under life insurance premiums charged, school expenses, contributions to EPF, PPF, NSC, assets in ELSS, and NPS, you will be able to claim a deduction on savings, investments, and expenditures. You can also deduct principal repayment from your home loan.

Disclaimer

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