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How to save income tax (For Salaried Individuals)

This article mainly deals with the understanding of some common ways to save income tax of a salaried individual

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 cetrtain 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. Medical Reimbursement:

If your offer letter contains medical reimbursement as a part of salary breakup then you can claim upto Rs.15,000/- as reimbursement of medical expenses of self and dependents also.

But for this you will have to submit medical bills to your company.

2. HRA:

Before filing your Income tax return, pls must assure that your company provides you House Rent Allownace to compensate for your rent expenses.

HRA calculation will be covered in next article along with other important calculation of income tax.

3. Conveyance Allowance:

It is an allowance provided to the employees to meet conveyance expenses incurred from moving to office from residence. This allowance can also be checked from your salary breakup. If employer provides transport facility then this allowance cannot be claimed.

Rs. 19,200 per annum is provided as conveyance allowance.

4. 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 8.5% gets accrued on it. This is a retirement benefit that companies with over 20 employees must provide.

5. 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.

6. Deduction u/s 80C:

By investment in following tax saving schemes  upto a maximum limit of Rs.1,50,000/- an individual can save taxes

  • PPF (Public Provident Fund)
  • EPF (Employees’ Provident Fund)
  • Five year Bank or Post office Tax saving Deposits
  • NSC (National Savings Certificates)
  • ELSS Mutual Funds (Equity Linked Saving Schemes)
  • Kid’s Tuition Fees
  • SCSS (Post office Senior Citizen Savings Scheme)
  • Principal repayment of Home Loan
  • NPS (National Pension System)
  • Life Insurance Premium (Read : ‘Best Term insurance plans‘)
  • Sukanya Samriddhi Account Deposit Scheme

7. Deduction u/s 80D:

Deduction u/s 80D on health insurance premium is Rs 25,000. For Senior Citizens it is Rs 30,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure

8. Deduction u/s 80DD:

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 can be availed.

To claim this deduction, you have to submit Form no 10-IA.

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: taxitrj1@gmail.com or write at the comment box.

Categories: Income Tax

View Comments (28)

    • Dear Mr. Indrajeet,
      First of all I want to clarify that HRA exemption is different from sec 80 C deductions & its limit of Rs 1,50,000/-
      HRA is an exemption u/s 10 from salary.
      Criteria to calculate HRA is as follows:
      Lowest of the following is exempt from tax
      1. Actual HRA received.
      2. Rent paid -10% of Baisc Salary ( it included DA if it is forming part of retirement benefits)
      3. 40 % or 50 % of Basic Salary ( 40 % if non metro cities)

      Thanks you

  • Dear all thanks you all for your valuable time. If you have any queries than you can mail me at taxitrj1@gmail.com
    & for informational videos pls subscribe my youtube channel " Free Mein Seekho". It shares valuable information.

  • I am employee & studying 3yr polytech reg.course. my said course fee is countable for saving or not.

    • No deduction will be allowed for expenses on own study. Only childrens' tution fees is allowed as deduction u/s 80 C

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