If you are a salaried employee and looking for tax planning, then this article is very important for you. Here, we have shared tips to save tax on your salary.
Tax Planning for Salaried Employee
Following are some income tax saving tips:
1. House Rent Allowance (HRA)
For those who live in a rented house/apartment, can claim HRA to lower tax.
2. Leave Travel Allowance (LTA)
For travel within India, an employee can avail exemption for the trip under LTA.
3. Employee Contribution to Provident Fund (PF)
EPF contributions can be claimed for tax exemption under Section 80C of the Income Tax Act.
4. Standard Deduction
Post the 2019 budget, employees can now claim a flat Rs. 50,000 deduction from the total income, thereby reducing the tax.
5. Professional Tax
Professional tax is a tax levied by the state and is Rs 2,500. It is deducted by the employer and deposited with the state government. Hence, it is allowed as a deduction from your salary.
6. Exemption of Leave Encashment
Some employers allow you to carry forward some amount of leave days and allow you to encash them while others prefer that you finish using them in the same year itself.
7. Donations to Political Parties
Any donation made to political parties is exempt from tax if it satisfies certain conditions under section 80GGC.
8. Meal Coupons
Some employers provide meal coupons like Sodexo or Zeta to their employees. These aren’t taxable up to Rs 2,600 p.m.
9. Medical Insurance
You can claim Rs 25,000 against insurance premium paid towards to cover their spouse, dependent children. You can claim another Rs 25,000 against insurance premium paid towards to cover the life of parents. If the parent is a senior citizen then you can claim Rs 50,000 instead of Rs 25,000.
10. Home Loan
You can claim a tax deduction for interest on a home loan of up to Rs 2,00,000 in a financial year under section 24.. Moreover, you can claim the tax deduction of principal amount repayment under section 80C of up to Rs 1.5 lakhs.
11. Education Loan
You can claim a tax deduction against the interest on education. Such interest must be paid out However, the deduction is available for 8 financial years or up to the actual complete repayment of the loan, whichever is earlier.
12. Mutual Funds
An investment in ELSS equity linked savings scheme qualifies for a tax deduction. You can claim deduction under section 80C of up to Rs 1.5 lakhs.
80C investments include FD, Equity Linked Savings Scheme, Insurance policies, etc.