• Mar
  • 31
  • 2015

Tips to save Income tax for Salaried Person

Article ID 2822 | Posted In Income Tax | , | 27 Comments » Print Friendly and PDF

CA Sandeep Kanoi

CA Sandeep KanoiOften, investment for most individuals begins and ends with tax planning. Although it is pertinent to avail tax breaks, this should not be the sole focus. Start by jotting down your key financial objectives, the tentative time of money requirement and the corpus needed to achieve those goals. One can use tax saving investments effectively, to achieve financial goals. For example, one can take a children’s plan that also provides tax benefit. Consider the impact of inflation on your needs. After your first few working years, as income goes up, it is wise to invest beyond one’s tax saving investments to achieve your goals. Also, evaluate the life cover requirement, while planning for your taxes. We are giving below a brief on some of the Popular allowance / Exemption and deductions, benefit of which can be taken by the salaried taxpayers to reduce their tax burden.

Maximising your tax saving

1. Exemptions/reimbursements – Identify the reimbursements available from the company and take maximum advantage of the same. Normal expenses that one incurs could help save tax. Example- Telephone/fuel reimbursements, meal vouchers and company car. A person in lower tax slabs can reduce his tax liability to nil with exemptions alone.

Similarly, salaried employees staying in rented apartments can claim exemption under Section 10(5) of the Act in respect of house rent allowance by making the HRA a component of there salary.

Some of The Popularly Known Exemptions/Reimbursements

House Rent Allowance
Minimum of –

1. Actual HRA

2. Rent Paid – 10% of Basic

3. 40a% of Basic (Non-Metros) or 50% of Basic (Metros)

House Rent Allowance (HRA) Taxability & calculation


Transport Allowance

Rs 800 / Month (1600 Per Month from A.Y. 2016-17)

Leave Travel Allowance

Two trips in a block of 4 Yrs Amount not exceeding Air Economy or Rail AC I Fare shall be for shortest distance and for a single destination

Taxability of Leave Travel Allowance (LTA) – Section 10(5)

Medical Reimbursement – Section 17(2) proviso

Up to Rs. 15,000 in aggregate in a year

2. Deductions

  • Section 80C allows a maximum limit of Rs 1.50 lakh across investments ranging from provident fund, PPF, infrastructure bonds, fixed deposits (5 years or more), Sukanya Samriddhi Account, NSC, insurance/pension plans, unit linked insurance, equity linked savings scheme etc. It also includes tuition fees of your children and the repayment of principal on your housing loan.  Deduction under section 80C and Tax Planning
  • The interest component on your home loan has a separate limit of Rs 2 lakh. Income Tax Benefits from House Property and Loan
  • Medical premia upto a maximum of Rs 15,000 (Rs. 20000/- wef A.Y. 2016-17) qualifies for deduction, with an additional Rs 15,000 for parents. Additional deduction of 20,000/-  (Rs. 30000/- wef A.Y. 2016-17) could be availed in case of a senior citizen.You can claim a separate deduction for medical premium of your parents.  Deduction U/s 80D for Mediclaim Premium to Individual, HUF, Senior Citizens
  •  A person  who have spent money on the maintenance (including medical treatment) of dependant persons with disability, could avail deductions  80DD of the Act. Section 80DD Deduction- Medical expense of disabled dependent.
  • Individuals paying interest on education loan should obtain the interest payment certificate under section 80E of the Act. Section 80E – Deduction for Interest on education Loan
  • Those who are suffering from  not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 50,000/- and in case of severe disability to the extent of Rs. 100,000/- under section 80U of the Act. Deduction U/s. 80U for disabled persons

(Republished with Amendments)


  • Pinki Tripathi

    my gross salary is 48200/month and after EPF deduction I receive 37400/-
    I have insurance for Rs. 85488/year and I deposited in PPF account 1500/ & sukanya plan Rs. 1000/-. I give rent 20000/- per month. Is there any posibility that my companywill deduct tax from my salary. Please advise.

  • Bhavesh Patel

    My salary is 8 Lakh I need complete information how can I save tax.

  • kumar k iyer

    i would like to know the procedures for availing personal loan from individuals for the purpose of house repair/maintenance and to claim income tax deduction for interest paid on the principle in income tax.

    please guide
    me.

    alternatively what are the deductions available for individuals huf to claim income tax refund.

  • deepak

    hi sir..

    i am having an annual salary of 8lakhs. As per tax slab, i guess in need to pay 30000+60000 in total 90k as tax. if have an investment of 1.5 lakhs, it means that i need to tax for the remaining 6.5 lakhs??

  • chandan singh kashyap

    I will solve your problem. But you have to pay for this 10% of taxable amount.

  • Ranadip Das

    Dear Sir,
    I earn about CTC 7.4 lacs per annum, lic -148000, How to save taxes…

  • Pallavi

    Hi Sir,

    My earning is 900000 per annul CTC, please advice me good tax saving schemes.

    • Srikanth

      Your Total Annual Salary is 9,00,000
      Basic Tax exemption :Female – 2,50,000
      Under 80C LIC,Suvidha,Bajaj etc – 1,50,000
      Rent Allowance – 1,20,000 > 12K PM 40% of 50%
      P.Tax – 1,400

      Remaining amount under Tax = 3,78,600
      Tax on Total income 37,860+ Cess

    • Srikanth

      PPF,LIC,Suvidha if you have a girl child.
      NPS also good Options – which is extra 50000.
      Home loan for you is a good option. you can save 200000 on interest and principal under 80C. and HRA you can claim for 1st Year.

  • dhandapani

    my gross salary is 1150000.please suggest my tax saving plan

    • Srikanth

      please see the comments mentioned for Pallavi, same for you also.

  • Biswabhusan Panda

    Awesome information about Tax Saving. Really Financial plan can save income.

  • veni

    My sal is 8Lks.I need complete information how can I save tax.

  • krishna

    If you want to save the tax then you must know about the section that deals with Saving of Income Tax.

  • Afsaar
  • Kirpal singh sangwan

    Salary 14lac p.a.guife. How I can save maximum income tax.

  • Naresh

    One can deposit max Rs. 1.5 lacs in PPF a/c. Its tax free. Also one can buy Equity linked mutual funds…

  • Naresh

    I earn abour 6 lacs per annun, How to save taxes…

  • Sangram Kishore

    Hi my CTC is 17 L per annum and my only investment is 60000 and PF is 50000.

    What is the process for saving tax. Should I invest more on PPF/FD..

  • shailesh

    my wife having salary of 360000 p. a from this year and deduction is only tds.in my salary structure no pf allowance anything. pls. tell me how i can save taxes. and i dont have any investment nor any insurance.plus got difference of 206000/- this year for six month
    pls give me easiest way.

    • srinivasan.Raman

      Play ur Tax . By Investing 1.5 lacs in various instruments ( PPF. Insurance etc ) you save only 15,000/- ( 10% of 1,50,000). Home loan is good ( 20 lacs )

  • reema

    hi sir,

    pls guide me how to save taxes.
    i am a women. having salary of 360000 and deduction is only tds.in my salary structure no pf allowance anything. pls. tell me how i can save taxes. and i dont have any investment nor any insurance.

    pls give me easiest way.

  • http://taxguru.in/income-tax/tips-to-save-income-tax-for-salaried-person.html Alisa

    hi sir,

    am new to this please guide me how to save tax. Please send a test mail I want to know like for lic or mutual funds the tax exemption is 150000 and if we are investing in medical insurance or medical reimbursement for parents will it be counted apart from this 150000

  • rajiv

    sir
    I am a central govt employee joined in 2001 can I avail Rs. 50000 expemtion under 80 CCD in investing in National Pension Scheme.
    If not
    Or if I invest by my wife name or account then also can i avail exemption ?

  • SHEKAR G J

    Dear Mr Sandeep,

    it is not conveyance allowance, it is Transport allowance exempted up to 1600 PM.

    Conveyance is exempted up to amount actually spent for office purpose.

    Regards
    Shekar

  • mahesh maisuria

    Post office monthly income scheme is taxble or not!

  • A K Sharma

    80CCD(1B) which is applicable from FY 2015-16 is not covered.