CA Aashish Ramchand
The general perception when it comes to salaried employees is that there isn’t much scope for saving tax. But that isn’t true. In fact there are many avenues under the head “Income from Salary” in which tax savings are possible.
Your total salary is basically an amalgamation of various incomes called by different names. It’s a total of your basic salary + various allowances + various perquisites and certain other incomes like commission etc. What most people are unaware of is that apart from basic salary, other incomes like allowances and perquisites are exempt but only up to a certain permissible limit. Every employee can (with an approval from his employer) alter his salary package in a way which suits his or her needs to avail maximum tax benefits.
All employees must empower themselves with the knowledge of the various exemptions that are available in case of some very common day to day allowances and perquisites.
House Rent Allowance – HRA granted to an employee is exempt to the extent of the least of the following
1. 50% of your salary (in case you reside in either of the 4 metro. In all other cases its 40%)
2. Rent paid in excess of over 10% of your salary
3. HRA actually received.
Transport allowance – Any transport allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty, shall be exempt to an extent of Rs. 1600 per month wef FY 2015-16. Earlier up to Financial Year 2014-15 the limit was Rs. 800 per month.
Also Read- CBDT Notifies Revised Transport allowance exemption limit
Rent free un/furnished accommodation provided by an employer to his employee. – The valuation of such a perquisites in respect of the accommodation provided is as shown :-
a) 15% of the salary if the accommodation is provided in a city having a population exceeding 25 lakh
b) 10 % of the salary if the accommodation is provided in a city having a population above 10 lakh up to 25 lakh
c) 7.5% of the salary if the accommodation is provided in a city having a population up to 10 lakh
In case where furniture is also provided by the employer, 10% of the your salary is taken as the value of such furniture where the same is owned by the employer. If the same is not owned, the actual hire charges paid b the employer are taken.
Also Read- Valuation of Rent Free unfurnished accomodation
Other perquisites such as employer’s contribution to staff group insurance scheme or recreational facilities, including club facilities extended to all employees are exempt from tax in all cases.
I have discussed the above exemptions with you so that you, the employee knows the available exemptions. With this you can now design your salary package in such a way that it brings you maximum tax benefit. You can try and restrict your allowances within the exemption limit and also plan your taxes accordingly as you know what the value of your perquisites.
But the main tax saving tip is the one I am about to discuss with you. According to section 80CCD(2), the employer’s contribution made to a pension scheme, which is allowed as a deduction to the employee would be available to him over and above the Rs. 1,50,000/- of section 80C, 80CCC and 80CCD(1). Therefore you can now make this a definite part of your salary package where you tell your employer to contribute 10% of your salary to a recognised pension scheme and avail a 100% tax benefit on the same.
Also always remember to give your home loan details to your employer and always make sure you have exhausted your 80C and 80D deduction limit.
(Author is CA by profession & Co-Founder of Make My Returns (www.makemyreturns.com) & can be reached at aashish@makemyreturns.com)
(Article was first published on 07.02.2013 and republished with amendments)
what is the last date for getting the form16 for govt. employees or can we file ITR with out form 16
Can an unmarried person claim Education allowance & Hostel allowance to the extend of Rs 800. Act says actual expense incurred has no relevance just like TA
Sir,
Whether the TA Exemption of Rs.1600 is inclussive of Dearness Alowance on it or just TA only. This is effective from FY 2015-16,
Sudev
Sir,
As far as deductions towards Transport allowance is Rs. 1600 per month for the FY 2015-16 as against Rs.800/- Whether Rs.1600/- is inclussive of DA element on it or just TA only. Pl clarify.
Dear Sir/Madam,
Whether salary structure of an Employee can be differ from another employee at the same level in the same company and same FY?
Please update me asap.
Thanks in advance
Lokesh Agarwal
********* Dear sir,
I am a govt employee appointed in 1992 and saving Rs. 1,50,000 in GPF, HOME LOAN PRINCIPAL AND LIC UNDER 80 C.
******** Now there arises three questions………
(1) In addition to this, can I save Rs. 50,000 in NPS under 80 CCD sub section (1B).
(2) Is this section 80 CCD (1B ) allowed over and above maximum limit of Rs. 1,50,000 of the section 80 CCE, like 80 CCD (2) ?
(3) How can I open NPS account?
NOTE: (1) When I asked the NPS toll free number about first question, they said “YES”.
But in Swamy’s book in page no 129 in example no. 14 , 80 CCD (1B) included under 80 CCE resticting the limit to Rs.1,50,000. Kindly clarify.
I HAVE TAKEN HOME LONE FOR PURCHASING LAND IN ONE OF ANSAL HOUSING COLONEY IN GHAZIABAD. IS EXEPTION ON INTEREST CAN BE CLAIMED?
I would like to know how much value is exempt against Car allowing Fuel & Driver salary. if Car is not in the name of employee then what are the terms.
Sir,
My salary details is under mentioned. Please guide me how can i save my tax. i paid 14000 Rs as rent for house per month. My medical expense is around 2500 per month. My travel expanse from home to office is more then 3000 P.M.
Basis 25800
HRA 12900
TRAN. ALL 800
MEDICAL 1250
LTC 2149
UNIFORM EXP. 101
Please suggest me which documents are valid to save the tax
Sandeep Gupta
Hello Sir/Madam,
My query is:
If a person has taken a joint Home loan on his name and his spouse name as coapplicant with equal share of 50% in the Flat. If they buy another Flat with same combination 50% ownership, in this case whether they will be eligible to get the exception on their new flat EMI’s under 80C for interests. Please advice.
Considering the 1st flat EMI is completed.
Regards,
Nagesh
Hello Sir\Madam,
I have taken a home loan jointly with my husband. and the house registered under both of us. and the ECS is been tagged to my husband’s salary account. could you please let us know what docs need to be submitted for tax exemption.?
Is the loan account statements and the registration documents would suffice the need.?
Or any documents stating individual contribution are mandatory.?
No u can’t claim Exemption.
REASON BEING:
If you are only person repaying the loan, you can claim the entire tax benefit for yourself (PROVIDED YOU ARE AN OWNER OR CO-OWNER).
You should enter into a simple agreement with the other borrowers stating that you will be repaying the entire loan. If you are paying part of the EMI, you will get tax benefits in the proportion to your share in the loan only if u are an applicant or co-applicant to the hosing loan raised.
Hi,
Thanks for the reply.
It is housing loan.
Hi Subhash,
Thanks for the reply. It is a housing loan. My father is not claiming any benefit. Could you please tell me what proof should i submit for claiming exemption because loan account is held under the name of my father.
Regards,
Girish
Hi
Girish what kind of loan your father took.
if it is int nature of housing loan and your father is not claiming any benefit, then you can claim the benefit for the same.
if is general/personal loan then no benefit.
Dear Sir/ Madam,
I have a doubt regarding the tax exemption in my Salary account. I am not sure whether it can be claimed as a exemption or not.
Currently i am paying some part of the loan amount taken by my father in his name. For ex: EMI is Rs.10000 p.m. I am contributing nearly a sum of 6000.pm.
Please advice whether i can claim exemption for the same. If so, please tell me procedure.
Thanks in advance!!
Girish