Tax-saving options for salaried employees in India, along with examples

1. Income Tax Deductions under Section 80C:

  • You can invest up to ₹1.5 lakh per year in specified instruments to avail deductions under Section 80C.
  • For example, if you invest ₹1.5 lakh in a tax-saving fixed deposit with a lock-in period of 5 years and an interest rate of 6%, you can save tax on the entire investment amount.

2. Medical Expenses and Health Insurance:

  • You can claim deductions for medical expenses and health insurance premiums under Section 80D.
  • For instance, if you pay ₹25,000 as health insurance premiums for your family, you can claim a deduction of ₹25,000 from your taxable income.

3. House Rent Allowance (HRA):

  • If you receive HRA as part of your salary and live in a rented accommodation, you can claim HRA exemption.
  • For example, if your annual HRA is ₹3 lakh, and you pay ₹2 lakh as rent, you can claim an exemption on ₹2 lakh (subject to certain conditions).

4. Leave Travel Allowance (LTA):

  • You can claim LTA exemption for travel expenses incurred on domestic holidays with your family.
  • Let’s say your annual LTA entitlement is ₹50,000, and you spend ₹40,000 on a family vacation. You can claim an exemption on ₹40,000 (subject to specific conditions).

5. Standard Deduction and Professional Tax:

  • Salaried employees can claim a standard deduction of ₹50,000 from their salary income.
  • Additionally, professional tax deducted by your employer can be claimed as a deduction.
  • For instance, if your professional tax deduction is ₹2,500, you can claim it as a deduction from your taxable income.

6. NPS (National Pension Scheme):

  • By contributing to the NPS, you can avail additional deductions under Section 80CCD(1B).
  • Suppose you contribute ₹50,000 to the NPS. You can claim this amount as an additional deduction from your taxable income.

7. Interest on Home Loan:

  • If you have a home loan, you can claim deductions for interest paid on the loan under Section 24(b).
  • For example, if you paid ₹3.5 lakh as interest on your home loan during the financial year, you can claim this amount as a deduction.

8. Reimbursements and Perquisites:

  • Certain reimbursements and perquisites provided by the employer may be tax-free up to specified limits.
  • For instance, if your employer provides a conveyance allowance of ₹1,600 per month, the entire amount can be tax-free.

Remember that the tax-saving options and deductions mentioned above have specific conditions, limits, and eligibility criteria. The examples provided are for illustrative purposes and may vary based on individual circumstances and the prevailing tax laws at the time. It’s advisable to consult a qualified tax professional or chartered accountant to understand the specific deductions applicable to your situation and maximize your tax savings effectively.

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Author is A Practicing Chartered Accountant with over 5 years of rich experience in Company Law, Audits, Accounts & taxation.  She is keen in streamlining business accounts of the Company and provide Business advisory services She can be connected on sweta@caswetamakwana.com or on 9819244185.

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Qualification: CA in Practice
Company: Founder of Makwana Sweta Associates, CA Firm and Nish Academy providing skill based training programmes into Accounts & Finance
Location: Mumbai, Maharashtra, India
Member Since: 20 Aug 2017 | Total Posts: 89
A Practicing Chartered Accountant with over 5 years of rich experience in Company Law, Audits, Accounts and taxation. She is a writer at her own blog https://insights.buddingbusiness.com/. She is keen in streamlining business accounts of the Company and provide Audit and compliance advisory services View Full Profile

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