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Income Tax Saving Tips: The Income Tax Department in India has a progressive tax system, which means that the tax rate keeps increasing with the income. However, you can save a lot through tax deductions. You can opt for many tax-saving measures to reduce your tax burden. Here we will tell you how even if your annual income is Rs 12 lakh, you can reduce your tax to zero through reimbursement and investment.

do this work first

First of all, contact your company's HR and change your salary structure. In this, HRA (Housing Rent Allowance) is Rs 3.60 lakh per year, LTA (Leave Travel Allowance) is Rs 10,000, and reimbursement of phone bills can be Rs 6,000 annually.

On a salary of Rs 12 lakh, you will get a standard deduction of Rs 50,000 under Section 16; you can also claim professional tax exemption of Rs 2,500. The rest is HRA of Rs 3.60 lakh per annum under Section 10(13A), and LTA of Rs 10,000 under Section 10(5).

This way you will get the benefit of 1.5 lakh

With the above-mentioned deductions, your taxable salary will come down to Rs 7,71,500. Now you must remember that you are still left with a deduction of Rs 1.50 lakh to claim under Section 80C. If you have paid LIC policy premiums, or invested in PPF, EPF, NPS, NSC, or you have paid your child's tuition fees, you can get a total deduction of Rs 1.50 lakh under Section 80C.

After this, what things will you get benefit?

  • Central government employees or people who have invested in the Tier-1 scheme of NPS can get an additional deduction of Rs 50,000 under Section 80CCD
  • After these two deductions (Rs 1.50 lakh + Rs 0.50 lakh = Rs 2 lakh), your taxable income will be Rs 5,71,500
  • Section 80D will allow you to claim tax exemption for premiums paid on health insurance policies

Now you will save zero tax

As per Section 80D rules, you can claim Rs 25,000 for health insurance premiums paid for yourself, your spouse, or your children. Apart from this, you can claim a deduction of Rs 50,000 for premiums paid on health policies of your senior citizen parents.

With this deduction of Rs 75,000, your taxable income will come down to Rs 4,96,500. On that income, you will not have to pay any tax.

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