Everybody wants to save tax in whatever possible way and in this bargain many chartered accountants in the country has become millionaires. The game of saving tax is very tricky and only a professional CA can handle this situation in a very systematic manner. But besides having a good CA it is very important that you should also know the route of saving tax. Read here.
According to the news published by the NDTV profit, with the increase in the income, our tax liabilities are also increasing day by day. In this article, the tax experts have shown some smart ways to cut down your tax liabilities substantially.
Sudhir Kaushik, CFO, and co-founder of Tax Spanner, says, “The tax laws do have the provisions which can of help you to reduce your tax outgo to nil even if your cost to company (CTC) is Rs 20 lakh.” But that is possible if there is a complete flexibility to the taxpayers to get their salary restructured and they use the various tax provisions, he adds.
Here is how a person can cut down the tax outgo to zero for income up to Rs 10 lakh.
A basic income of Rs 2.5 lakh per annum is exempted from income tax.
You can claim a deduction of Rs 1.5 lakh under Section 80C. There are various investments such as public provident fund (PPF), tax-saving equity mutual funds and tax-saving fixed deposits that qualify for deduction under this section. You can also claim payment made against the principal of home loan as a deduction under this section.
Also, if you have a home loan, you can claim a deduction of up to Rs 2 lakh against the home loan interest payment. Or if your company gives you house rent allowance (HRA), you can claim a deduction for it. You can claim the minimum of the three for HRA: a) The HRA paid by your employer; b) Actual rent paid by you minus 10 per cent of basic salary; c) 50 per cent of salary, if living in a metro or 40 percent of the salary, in case of non-metro. d) You can claim both HRA and deduction against a home loan if you are residing on rent in another city due to employment reasons.
You can claim an additional deduction of Rs 50,000 for investments made in National Pension Scheme (NPS) under Section 80CCD. Section 80CCD represents deduction with respect to a pension plan notified by the government, including NPS.
Apart from this, employer’s contribution to NPS of up to 10 per cent of basic salary is tax exempt under Section 80CCD(2).
You can claim a deduction of Rs 25,000 per annum against medical insurance premium paid. Apart from this, you can claim an additional Rs 30,000 for the medical insurance premium paid by your parents.
You can avail a deduction of Rs 25,000 for investments made up to Rs 50,000 in Rajiv Gandhi Equity Saving Scheme (RGESS). New investors with income below Rs 12 lakh can invest in this scheme.
If your salary has allowance components, there are certain allowances against which you can claim tax deductions. You can avail a deduction of up to Rs 15,000 as medical allowance. Food coupons of up to Rs 2,200 per month are also tax-exempt. There are certain allowances such as periodicals and uniform which can be claimed as per actual.
Gifts of Rs 5,000 per annum from an employer are tax-exempt.
You are also allowed to claim a transport allowance of Rs 1,600 per month which is equal to Rs 19,200 a year.
You can claim a children’s education allowance of up to Rs 100 per month per child. Also, you can claim up to Rs 300 per month against hostel fees for each of your children.
If you taxable income is below Rs 5 lakh, you are entailed to a tax rebate of Rs 5,000 on your total tax.