Often, 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. Saving Tax on 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(13A) 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

a. House Rent Allowance

Minimum of –

1. Actual HRA

2. Rent Paid – 10% of salary

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

Salary here means basic salary and includes Dearness Allowance if the terms of employment so provides. It also includes commission based on fixed percentage of turnover achieved by the employee as per the term of employment contract.

b. Transport Allowance

Rs 1600 / Month (However wef A.y 2019-20 this allowance has been withdrawn and in lieu of it a standard deduction of Rs 40,000 u/s 16 shall be allowed)

c. Leave Travel Allowance

Two trips in a block of 4 Yrs for 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)

d. Medical Reimbursement – Section 17(2) proviso

Medical Reimbursement Up to Rs. 15,000 in aggregate in a year is exempt.(However wef A.y 2019-20 this allowance has been withdrawn and in lieu of it a standard deduction of Rs 40,000 u/s 16 shall be allowed)

2. Income Tax Deductions

a. Section 80C of Income Tax Act, 1961

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

b. Home Loan Interest

c. Section 80D of Income Tax Act, 1961

d. Section 80DD of Income Tax Act, 1961

  •  A person  who have spent money on the maintenance (including medical treatment) of dependant persons with disability, could avail deductions Rs. 75,000 if the disability is not less than 40 per cent and Rs 125,000 in case of severe disability u/s 80DD of the Act. Section 80DD Deduction- Medical expense of disabled dependent.

e. Section 80E of Income Tax Act, 1961

f. Section 80U of Income Tax Act, 1961

  • Those who are suffering from  not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 75,000/- and in case of severe disability to the extent of Rs. 125,000/- under section 80U of the Act. Deduction U/s. 80U for disabled persons

(Republished with Amendments)

Author Bio

Qualification: CA in Practice
Company: Taxguru / Sandeep Kanoi & Associates
Location: Mumbai, Maharashtra, IN
Member Since: 27 Feb 2017 | Total Posts: 599
A Blogger by Passion and a Chartered Accountant by Profession. View Full Profile

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73 responses to “Tips to save Income tax for Salaried Person”

  1. financialcontrol.in says:

    Complete Package

  2. Suman Gayen says:

    Can you elaborate on the fule expenses provided by company?

  3. Dharmendra Das, 1/7, Gandhi Colony, Kolkata-40 says:

    MY GROSS SALARY ABOUT RS.4,50,000.00 PER YEAR. I BEG YOUR SUGGESTION THAT I CAN SAVE FROM INCOME TAX

  4. Sridhar says:

    HRA is exempt U/s 10(13A) not under section 10(5)

  5. Prakash says:

    contribution to Atal pension yojna whether makes me eligible for additional deduction under sec 80cccd (1b)?

  6. dinesh says:

    Thank you very much for your tips ! it was very informative ! I have lot of doubt on Deduction Sections!
    Thank you very much Sandeep.

  7. S.S.MUKHERJEE says:

    My income is around Rs. 4.0 lakh yearly ,. I am a engineer . Further up-gradation my qualification I deposited myself Rs. 30000/- to a recognize university .Would I get deduction this amount from u/s 80c.
    or how much amount I shall get deduction ?

    S.S.Mukherjee

  8. Jagdish Chand Verma says:

    My annual income 9.0 lakh
    Home loan interest-73214/-
    80C savings-2.30 lakh
    How many I Tax ??
    In which savings I can deduct Income tax ??

  9. Tapan Nigam says:

    Hi Sir, I have 3 FDs (tenure for 2 yrs) & 10 % TDS (around ~ 8K) is already deducted by bank on these investment. Should I disclose interest from FD as another income & pay further tax on this as my current incomes is in 20% tax slab. Kindly suggest.

  10. Rina says:

    Dear All,
    Please anyone can help me to make salary break-up,which will help our employees to save their tax
    suggest me the exempt tax amount in following components of salary:
    1.car and fuel,
    2. business promotions,
    3.child education,
    4.medical
    5.LTA
    6.NPS,
    7.Meal coupons,
    8.Car lease,
    9.VPF,
    10.Medical professional development
    11.Health club membership
    12.Mobile bill
    13.Internet bill
    14.PPF as well
    15.Books & periodicals

  11. abhi says:

    i am gov salaried doctor i always pay taxes but in 2014 i withdraw around 20 lac from saving account which comes from different fds for the buying of land but i will not finalize any deal some amount i have used in other places but now i have 11 lac cash can i deposit it again in my account what is the tax provinces

  12. CHAND says:

    i am govt.doctor,my salary ABOUT 56700 p.m.(with H.R.A) but in hand i am taking 52600 p.m.(GPF AND SOME OTHER DEDUCTION)
    i don’t KNOW what to do for next year please could you suggest me what will be my future plan for saving the INCOME tax,i have education loan I HAVE no insurance policy, no ppf account,no policy,no mediclaim,so please advice where i will invest and which policy,i am newly married.

  13. MANISHKUMAR MOHANLAL PATEL says:

    sir my salary is 43000 per month, ple. sagest my tex planing . i have 24000 per year lic policy, 66000 per year PLI

  14. Rahul says:

    My gross Salary is around 30000 per month and i am a bank employee and i have staff housing loan from my bank so as per Income tax rule my interest gain (difference between staff rate & PLR rate) is calculated as my income so just because of that i have to pay more part of my salary as a TAX. So, is there any way that i can save my tax amount.

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