How to save income tax in India: Many households are facing liquidity crisis amid the coronavirus pandemic because salaries have taken a hit. In these times your tax outgo could create further problem for you. How to reduce the tax burden in current times when rebates on your House Rent Allowance (HRA), Leave Travel Allowance (LTA) have gone? Get answers to all your Income Tax Return (ITR) related queries here from Preeti Khurana, Chief Editor, ClearTax!
Here are a few questions first: How have taxes increased in the work-from-home situation; how to claim tax-free components of your salary; is it advisable to opt for a new tax system? Here is what you must do to save your money:
Tax-free components of salary
- HRA
- Conveyance Allowance
- LTA
- Entertainment Reimbursements
- Telephone and broadband services
Shifting to your parent’s house will save your money but you will now have to pay tax on your HRA. Tax exemptions are there under Section 10(13A) of the Income Tax Act and you can avail it on producing the rent receipts.
Since there are travel restrictions in place, claiming your LTA will be difficult. You can claim tax benefits twice in four years. Many companies are giving an option of giving LTAs along with the salary. You will get LTA after deduction of tax. Conveyance reimbursement is also given on production of receipts. Same is the case with the entertainment reimbursement. Many people have stopped eating outside.
Should you opt for the new tax system or stick with the old one?
- You can opt for the new income tax system if you have still not submitted your bills
- No tax-free components in new system
- HRA, LTA taxable components of salary
- You can opt for new system if unable to show proofs of expenditures
- Carefully see which tax system suits you
What is absent in new tax system
- Standard Deduction Rs 50,000
- HRA- Rs 2 lakh
- 80C Deduction- Rs 1.5 lakh
- 80D (Medical Insurance) – Rs 50,000
- 80EE (Housing Loan Interest)- Rs 50,000
How to reduce burden:
- Employees working from home should get some tax benefits
- Tax benefits on things like laptop printers and computers
- Employees can renegotiate salaries with employers
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- Flexibility in tax components. Employees should be allowed to allocate expenses in components where the expenses are less
