The time to pay your taxes has arrived and most taxpayers would be busy calculating their taxes and claims which can be made during Income Tax Return (ITR) filing. While the government does takes taxes from your income and income from other sources, it also gives the benefit to reduce those taxes by filing few forms and claim a certain sum on loans or investment. Every salaried individual has to pay taxes on the salary they receive from their employer. Your employers are bound to deduct taxes on your salary amount. Archit Gupta, Founder & CEO ClearTax says, “Whether you are a fresher or an experienced one, you will always want to pay less income taxes and save your money as much as you can. As, who would want to pay more when you can save it through some legitimate hacks.”
Therefore, are some of the popular income tax hacks to save taxes for salaried individuals, as per Gupta.
1. Standard Deduction- A Blessing!
Being a salaried individual is a blessing in itself. If you are a salaried individual, your total income gets reduced by Rs 40,000 through the standard deduction. The standard deduction was re-introduced in the Budget 2018 (for FY 2018-19 onwards), replacing the medical allowance of Rs 15,000 and transport allowance of Rs 19,200. In case you are filing your tax return online, it will be automatically allowed.
Budget 2019 has also been a great respite as the limit of standard deduction has been raised from Rs 40,000 to Rs 50,000, which will be applicable starting FY 2019-20.
2. Take full advantage of your rental payments!
The salaried individual who lives in rented accommodation and has a component of House Rent Allowance (HRA) in his salary structure can only avail the HRA tax benefit. If you are not paying the rent and receiving HRA from your employer, then the HRA will be fully taxable.
You have to submit your rent receipts to the employer for claiming the HRA exemption. In case, the total rent paid by you exceeds Rs.1 Lakh then you have to provide the PAN of the owner along with the rent receipts.
You will be able to claim the benefit only for the period you stayed in a rented house. The amount of the deduction will be the least of the following:
- Actual HRA received
- 50% of the salary* (for the metro cities) or 40% in case of the non-metro cities
- Rent paid in excess of 10% of the salary*
Calculation of Salary is done taking in Basic Salary + Dearness Allowance (if forming part of retirement benefits)
3. Exhaustive 80C options!
You can get a deduction of Rs.1.5 Lakhs under section 80C. You can invest in the tax saving options under 80C like PPF, NPS, Term deposits, Life insurance premiums, ELSS funds, children’s tuition fees and housing loan principal repaid among others.
You can exhaust the limit of investment and save up to Rs.46,800 of income taxes. Not only tax savings, but these investments will also help you grow your wealth and secure your future.
4. Your holidays can help you save taxes!
Being a salaried individual, you can save taxes by submitting the bills of your vacation under the Leave Travel Allowance(LTA) provisions of the Income Tax Act. You can avail the LTA exemption of the amount spent on the ticket fares for the trip within India. You can claim this exemption only if the LTA is the part of your salary structure.
5. Insure your family’s health and save on tax!
You should buy a health insurance plan for yourself, your spouse and your parents. This will not only secure your and your family’s health, but you can get a tax exemption under section 80D.
You can claim up to Rs.25,000 for the health insurance premium paid for yourself, your spouse and your dependent children. Furthermore, you can claim an additional benefit of Rs.25,000 under section 80D for your parents’ health insurance. This deduction rises to Rs.50,000 if your parents are senior citizens (more than 60 years of age).