A Quick Guide On How To Save Tax On Salary In India

A Quick Guide On How To Save Tax On Salary In India

A Quick Guide On How To Save Tax On Salary In India

If you are a salaried person then, you are definitely worried about the tax-man eating out a chunk of your hard earned money. But don’t worry today I will give you A Quick Guide On How To Save Tax On Salary In India.

So here are some great tips to save your money legally.

Restructure your salary to save on Tax

            There may be many expenses which you are Draining your money because of  your job. If you leave your job today, many of your expenses will end. Such as you wear a uniform just for the sake of your job. You travel to the office daily only for the job. You may be entertaining clients and spending over them to fulfil your job. You must be reading certain newspapers, magazines or books for your job purpose.

If you leave the job such expenses would end. It means, these are forced expenses and your employer should pay for them. Such expenses should go to the account of  employer expense. Since you are only medium of such expense this should not be part of your income.

Talk to your employer and ask to restructure your pay. You should get perks and allowances for such expense. This should not be part of your salary.

These perks and allowances are non taxable if incurred actually. However, you need to give proof of these expenses to avail tax-free allowances.

Some Allowances Which Can Save Tax

Conveyance

Driver

Newspaper, Books and Magazine

Medical Treatment

Uniform

Telephone and Mobile

Personality Development

Office Entertainment

 Save Tax On House Rent

            We get a job in a different city or place. We go there to do our job. If the company does not give us accommodation we have to rent out. We live in rented house because of our job. Therefore, expense of rent should be deducted from the taxable income.

Employers do give some part of your remuneration as House Rent Allowance (HRA). You subtract this HRA from your gross income. However, you cannot take full benefit of HRA for tax saving. There is a formula for the HRA tax benefit.

You can deduct the lowest of these from gross income.

Actual HRA given by the employer

50% of the basic salary plus DA if the employee is situated in Delhi, Mumbai, Kolkata and Chennai. Else, 40% of the basic salary plus DA.

Actual house rent paid by you, minus 10% of basic salary+DA.

(LTA)Leave Travel Allowances and Medical Expense

            Some personal expenses are also eligible for exemptions. These Expenses are deducted from your gross salary. Your employer may give you part of your salary as medical allowance. Check with the HR department.

If you produce an actual bill of medical expenses, this allowance becomes tax-free. So, Start collecting medical bills. However, it is limited to Rs 15,000 in a financial year. You can give receipts of medical expense of your dependants as well.

Get Invested To Reduce Taxable Income

            Certain investments give your tax rebate. These investments come under section 80C of deductions. The amount invested is deducted from your taxable income. Many of such investments come under EEE category. It means you need not to give tax at the time of  investment, earning and redemption. However, There is a maximum limit for 80C deductions

Giving Away Money For Charity, and Pay Less Tax

You can save tax on your donations. However, not every charity gives you 100% tax saving. Donations to  the PM relief fund, some notified NGO and political parties can give you the 100% tax benefit. You can also donate to scientific institutions and religious body and claim tax rebate.

Set Off Capital Gain, Save Tax

Salaried people need to give capital gains tax on their investments. Shares attract only short-term capital gains tax (In Budget 2018 this has changed).while property and gold attract both short and long term capital gains taxes. However, you can set off your capital gain  from an investment with the capital loss of another investment. Note, you can set off short-term capital gain only with short-term capital loss and long term capital gain with long term capital loss only.

You can also carry forward your capital loss up to 8 years. This will give a fairly good chance of tax saving on account of capital loss. Suppose you incur trading loss in shares. This loss can be carried forward up to seven years. In subsequent years your trading profit can be set off with this big loss.