Anyone would want to gain the most from their hard-earned salary. One way of doing that is saving on taxes. While understanding taxation can be confusing, it is possible smartly structure your salary, minimize tax liability, and maximize your financial gains. Your salary comprises various components, including allowances like HRA, traveling allowances, and so on. There are various ways to use these and reduce your tax burden.
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Basic and HRA Components
The House Rent Allowance (HRA) is a crucial component for tax savings. If you pay rent, ensure you claim the HRA exemption per the rules or claim deductions on your home loan interest paid on your home loan.
Opt for Reimbursements
Ask your HR to include a component of your salary in reimbursements, such as medical bills, fuel, telephone expenses, etc. These are often tax-exempt and can help lower your taxable income.
LTA Benefits
Subject to specific rules and regulations, you can make good use of LTA (Leave Travel Allowance). Plan your travel smartly and use this to your benefit.
Utilize 80C and 80D of the Income Tax
You can invest in various tax-saving instruments like ELSS, PPF, NSC, etc., where you could invest an amount every month, quarterly or yearly, and save taxes under Sec 80C of the Income Tax Act 1961. Similarly, under the Sec 80D Preventive Health Check-Up, you can claim deductions up to ₹ 5,000 for your and your family’s health check-up.
VPF (Voluntary Provident Fund)
Contribute more towards your EPF account through the VPF route allowing you to save more on taxes.
Meal and Food Coupons
Companies and corporates offer their employees perks like food coupons that they can use to purchase their daily lunch or dinner. These meal coupons may or may not be completely tax-free.
Tax laws and compliances in India can be complex and need careful attention to avoid legal hassles. Hence, you must consult a financial advisor to determine the best possible ways to restructure your salary structure. Make use of Sec 80C Tax Saving Instruments.
