The most awaited day for any working individual comes when they get a message which says “Salary credited” and sparing some of it, is the thing that everybody plans. Absolutely nobody can control the essential costs they have in their everyday life plan, at that point how to deal with your pay in a proficient manner?
In the event that cutting costs isn’t turning out, at that point Saving Taxes can be considered as one way to do it.
Tax liability is one big hurdle for all taxpayers and to save on taxes, it is very important to plan tax-saving well in advance. There are various media through which the Income Tax Department allows taxpayers to save money on their taxes. To figure out how to save on taxes, it is important to understand your tax slab and each of your salary breakup components.
Let’s discuss some legal ways through which you can save money on taxes:
Understanding your Payslip:
Plan your basic salary, it is the fixed component in your paycheck and so manages it accordingly. A salaried individual who lives in a rented house can claim their house rent allowance. The income tax laws have a method for computing HRA that can be claimed as an exemption.
Contribution to Provident Fund:
Provident fund is a retirement saving scheme managed by the government which enables the employee to contribute a part of their saving each month. At the time of their employment or retirement, these savings can be a huge benefit. The contribution will be of 12% likeness of the employee’s fundamental ay each month; this advantage can only be provided to that organization that has more than 20 workers according to the EPF Act, 1952.
Leave | Travel Allowance
Who doesn’t love travelling or there might occur some chances for emergency leaves, in both the situation Leave/ Travel allowance is given to those who claim for a trip only taken with their spouse, children, and parents but not with other relatives. Salaried individuals can avail this exemption for a trip within India under LTA. One needs to submit the bills of their expenses to their employer and can claim this exemption.
Medical Expenses
The medical emergency comes unexpectedly even though one is prepared with the savings, it is still expensive. One can save taxes on the amount they spent on medical treatments. Employers are given the medical allowance where they can provide their medical bills and make it tax-free. The maximum amount to claim on the medical bill in a year is Rs. 15,000. Under Section 80D, Section 80DD and Section 80DDB, the Income Tax Act allow deduction on income that has been spent by taxpayers for insuring their health, it is also applicable for relative’s health.
Professional Tax
For the entire salaried individual, Professional Tax is levied by the state government. This differs from state to state; however, the maximum amount collected should not exceed the limit of Rs 2500 per year. In your income tax return, professional tax is allowed as a deduction from salary income.
Standard Deduction
Standard Deduction has replaced the conveyance allowance and medical allowance. The employees can now claim flat Rs. 50,000 deduction from the total income; prior to the budget in 2019 it was Rs. 40,000 and reduces their tax outgo.
An offer of Equity Shares
So as to persuade individuals to put resources into equity shares and mutual funds, the Indian Government has excluded charge on any long haul gains that individuals win through the sale of equity shares. The tax is exempted only if individuals hold such offers for over 1 year.
These are the few legal ways through which one can save taxes from their salary. However, the most important thing to notice is that the individual should not try to save money by not paying taxes. Any amount saved without paying taxes will be considered as unaccounted money or black money which can result in a lot of problems.
