5 ways to save income tax for salaried employees in India


ways to save income tax for salaried employees in India; Income tax for salaried employees

5 ways to save income tax for salaried employees in India

Several tax payers think that tax deductions would be like investing in NSC or taking an insurance policy. I felt many tax payers might not be aware of the various tax deductions where a tax payer is eligible to claim. In this article we would cover the relevant tax deductions a tax payer is eligible and various ways to save income tax for salaried employees in India.

Ways to save income tax for salaried employees – U/S 80C

  1. There are various tax saving schemes, where a tax payer can invest and get tax exemption u/s 80C. The amount eligible U/S 80C is up to Rs 1 lakh.

Tax saving schemes u/s 80C (Eligibility up to Rs 1 lakh)

  • PPF: Investment can be done in Public provident fund (PPF) up to Rs 100,000 per annum. The PPF account needs to be maintained for a period of 15 years.
  • NSC: Investment in NSC can be done at any amount up to Rs 1 lakh. NSC are currently available for 5 years and 10 years period
  • ELSS: Equity linked saving is another option to save tax. The period of investment should be for 3 years.
  • Tax saver fixed deposit: There are various tax saver fixed deposits available.  Choose the best one to maximise the returns. The period of investment is 5+ years.
  • Life insurance premium: Life insurance premiums paid in the year would be eligible for tax deductions.
  • ULIP: Unit linked insurance plans is another combination of insurance + investment. Investment in such ULIP would also be eligible for tax deductions.
  • Provident Fund: Any amount paid by employer for provident fund would be eligible for tax deduction in this section.
  • New Pension scheme (NPS): Amount invested in NPS would be eligible for tax deduction under this section (Section 80CCD). You can refer our article on this subject.

Please note the above all put together is eligible for Rs 1 lakh tax deductions u/s 80C


Ways to save income tax for salaried employees – U/S 80D (Medical insurance up to Rs 30,000)

  1. Many of us take health care insurance / medical insurance, but I feel we never claim the tax deduction u/s 80D. Any medical insurance premium paid would be eligible for tax deduction up to Rs 15,000 (Up to 65 years of age) and Rs 20,000 for senior citizens.  Also any additional medical insurance premium paid for parents up to Rs 15,000 would also be eligible for tax deduction as per this section.

Ways to save income tax for salaried employees – U/S 80DD (Medical treatment)

  1. Medical treatment of handicapped dependent up to Rs 50,000 is eligible for tax deduction u/s 80DD. However under severe medical condition the amount eligible for tax deduction is Rs 100,000

Ways to  save income tax for salaried employees – U/S 80DDB (Treatment for specific diseases)

  1. Treatment for specific diseases would be eligible for tax deduction up to Rs 40,000 up to 65 years of age and Rs 60,000 for senior citizens.

Ways to save income tax for salaried employees – U/S 80GG (Rent paid up to Rs 24,000)

  1. Some of the employers would not be paying HRA as part of the salary structure especially in smaller companies. In such case, tax payer can get tax deduction for the rent paid up to Rs 2,000 per month. Thought there is a provision for this section, mostly it would be underutilized as the tax payer’s fall under this bucket would not be paying any tax due to less income.

Conclusion: Tax payers should come out of the mindset that investing in PPF or NSC are the only tax deduction options available. Considering all the eligible options would help in reducing the tax.

If you enjoyed this article, share the link in Facebook/Twitter. The links are provided below.

Suresh
myinvestmentideas.com


Article by Suresh

Suresh KP i.e. me have written 400+ articles on this blog. I love doing analysis and identifying the Best investment options.

35 Comments

  1. kiran says:

    Hi Suresh,

    I have heard about travel allowances apart from what you have mentioned above.

    It will be helpful if you can explain me how we can use this travel allowances and for which travels it is applicable and how much amount we can get exempt from tax for a particular year.

    • Suresh KP says:

      Hi Kiran, This provision is made by employer. They generally provide this by role / designation and not uniform across other companies. You should check with your employer about your company policies

  2. Anthony says:

    my annual pay is 6 lakh, if i buy a 2nd hand car for rs 4 lakh , do i need to pay any income tax then, as only 2 lakh income will show :)

    • Suresh KP says:

      Hi Anthony, Your car expenses are capital investment and does not fall under any income tax exemptions, hence you need to still pay income tax on Rs 6 L (net income)

  3. Vikas says:

    Hello Suresh Sir,
    If any buddy get HRA of rs 10000/- per year then can he/she is eligible to claim tax aexemption for rs 14000/- year? (24000-10000=14000).

  4. Vikas says:

    Nice article.

  5. Vikas says:

    Hello Suresh Sir,
    Thanks for such informative article. Keep posting.

  6. Nadeem says:

    Hi Suresh,

     

    Last year, I had invested Rs. 60000 in Tax Saving FD & 40000 in Tax Saving MF.

    Now, for the current year, do I need to invest Rs. 1 Lac again to save tax under Sec 80C?

     

    Thanks in advance.

    Regards,

    Nadeem

    • Suresh KP says:

      Nadeem, the amount you invested is to save tax for that financial year. Yes you need to invest up to Rs 1 Lakh to save tax for this financial year. Check our top ELSS tax saving mutual funds to invest for 2014. http://myinvestmentideas.com/2013/11/top-5-tax-saving-mutual-funds-elss-in-india-to-invest-for-2014/

  7. ak says:

    Hi Sureah,

     

    I am an NRI who has been posted to India and will be paid via the India payroll. What is the best way to save on the taxes. I have a housing loan / mortgage overseas, can I claim this and not pay tax on this amount.

    • Suresh says:

      Hi AK, Housing loan / mortgage payment done overseas cannot be claimed as tax deduction. There are several ways to save tax which includes the ones which are discussed in this article. 

  8. Prasad says:

    Suresh,

        What is this HUF ? Who can take this ?

     

    - Prasad

  9. S Sharma says:

    Another question, I live in my self owned house which was taken on loan earlier but the loan has been repaid now. I am planning to buy another house on loan. First, Will the second home be taxed under wealth tax? Secondly, can I get some kind of tax benefit on the loan take for the second house.

  10. S Sharma says:

    I have a company leased car. I don't have a driver. Can I show my wife(who is non working) as a driver and get tax exemption on drivers salary?

    • Suresh says:

      Ha Ha, For a minute, let us think practical. If you get caught with IT authorities do you believe they would accept your wife as driver ? 

  11. shma says:

    Good list of various options about how to save tax. One another option is if one has taken house loan then some tax can also be saved through it.

    • Suresh says:

      Hi Shruti, The reason it is not part of this list is it involves capital investment which every one cannot afford. Thanks for the suggestion.

  12. Suresh says:

    Hello – Can I and my wife (both salaried employees) file taxes together so that we can save tax together. Because one of us is in the 30% brkt, while the other is in the 10% bracket. 

    • Suresh says:

      Hi Suresh, No you cannot file tax return together. If this option would have been there, tax payers would have good option to save taxes.

  13. suresh says:

    Thanks, for your valuable advice, we expect some more ways to gets exceptions in salary

  14. kiran says:

    Hi sir,

    I am salaried person in form16 there is column entertainment zone. How to apply for this to save tax

  15. sapana pathak says:

    Initially if we dont have such savings  like FD, investment in ulip, or LIC then how to save tax, please let me know.

  16. Ranjeet Singh says:

    Dear Sir,

    I want to know about the driver of my car

    1.My car not given by company and not providing a driver

    but i have a driver and i have paying 6000 rs for the same

    can i save the tax on the above amount if it is then how much

    • Suresh says:

      Ranjeet, Since it is your own car, Rs 900 per month would come as exemption for driver salary. Please check with your company to claim this under tax exemption

  17. Ak Amit says:

    Sir,

    Apart from 80C category including Homeloan, Mediclaim, Under which category we can save tax, I dont want to invest in Equity.

    Please assist.

    Ak.

  18. preity says:

    Hi,

    Pls share other sections to get tax exemptions like interest from housing loan, donation to charity/ngo etc.

  19. Abhinandan says:

    SUresh,

     

    I have one question. Will I be able to invest in TAx Saving Mutual Funds for the next 3 years?

    From what I heard from an ICICI Direct advisor is that MF will not be eligible for TAx Saving from April 2013 onwards. Please help?

    • Suresh says:

      Abhi, This is a news to me. I referred Govt. income tax website again and could not find any such notification. There are 30+ tax saving mutual funds running and thousands of crores is being invested every year in these schemes and I don’t think there is any such decision. Since you expressed a benefit of doubt, please mail me the contact nos of ICICI Direct advisor so that I can enquire about this. You can mail me to Suresh@myinvestmentideas.com or leave a comment here.

Leave a Reply

Your email address will not be published. Required fields are marked *