Paying income tax is our duty because it helps our country to grow. But if given an option to not pay income tax or to pay less amount as income tax, I am sure nobody wants to loose this opportunity.
Today in this article, I am going to share some common ways by which we can save some amount of tax just by keeping in mind some important points while filing income tax return.
As per income tax slab rates, for the first Rs. 2,50,000/- there is no tax liability, it means no tax is required to be paid if income of a person is upto Rs. 2.5 Lakhs.
However Income Tax Department provides certain deductions under Chapter VIA and certain reimbursements & allowances which helps in saving tax to a certain extent.
So I will try to explain some common deductions in an easy manner so that you may understand it and apply it practically. Even if you face any confusion then you may mail me or ask query at comment box
1. Standard Deduction:
As per an amendment in the Budget 2018, tax exemption on medical reimbursement amounting to Rs. 15,000 and transport allowance amounting to Rs. 19,200 in a financial year have been replaced with a standard deduction of Rs. 40,000 (For FY 2018-19) and Rs. 50,000 (For FY 2019-20).
Before filing your Income tax return, please must assure that your company provides you House Rent Allowance to compensate for your rent expenses.
HRA calculation will be covered in next article along with other important calculation of income tax.
3. Employee Contribution to PF:
Both employer and employee contribute a 12% equivalent of the employee’s basic salary every month toward employee’s pension and provident fund. An interest of about 8.65% gets accrued on it. This is a retirement benefit is provided by those companies who has more than 20 employees working with them.
4. Professional Tax:
This tax is levied by state. The maximum limit is Rs.2,500/-. It is deducted by the employer from the salary of employees and deposited with the State Government. This can be claimed as a deduction while filing income tax return.
By investment in following tax saving schemes upto a maximum limit of Rs.1,50,000/- an individual can save taxes
You can claim up to Rs 75,000 for spending on medical treatments of your dependents (spouse, parents, kids or siblings) who have 40% disability. The tax deduction limit of upto Rs 1.25 lakh in case of severe disability (i.e. disability of 80% or above) can be availed.
To claim this deduction, you have to submit Form no 10-IA.
8. Section 80TTA:
This deduction in respect of interest on deposits in the savings which is available for Resident Individual or HUF (other than those assessee who has covered in Section 80TTB) and Maximum deduction of Rs. 10,000/- will be allowed under this section
9. Section 80TTB:
This deduction in respect of interest on deposits in case of senior citizens (a resident individual who is of the age of sixty years or more at any time during the relevant previous year) and Maximum deduction of Rs. 50,000/- will be allowed under this section
The above given list is not exhaustive one i.e. this not complete list, I have discussed here only some common deductions and allowances. If you want detailed discussion on any of the above deductions or allowances then you can ask me on my email id: [email protected] or write at the comment box.
(Republished with Amendments by Team Taxguru)