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 500+ articles on this blog. I love doing analysis and identifying the Best investment options.

37 Comments

  1. Rajat says:

    I have my own car and a driver. Fuel expense on the car is more than 5k per month. Driver's salary is 8k per month. I get a fuel reimbursement component in my salary of Rs. 5k per month against the bills submitted by me. Will I save tax on this complete 5k bills or a part of it. Also, if you suggest that I can save on driver's salary, how do I show my driver's salary as obviously I am not having a salary slip for driver :)

     

    • Suresh KP says:

      Rajat, This depends on the company offering it as tax free perquisite. If your company is allowing you to claim only Rs 5,000 as fuel reimbursement, you cannot claim more than that. Unless you are doing a business or you have income from profession, you cannot claim these expenses (say business expenses). If company is providing such perquisites, they would show in your salary component

  2. 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

  3. 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)

  4. 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).

  5. Vikas says:

    Nice article.

Leave a Reply