There are several deductions available under Income Tax Act 1961 like the exemptions under sections 80C and 80D
Tax saving investments like Public Provident Fund and National Pension Scheme, among others, also help the salaried employees to save some money.
There are several deductions available under Income Tax Act 1961 like the exemptions under sections 80C and 80D. However, for the salaried class the options to save more on income tax are limited and it needs meticulous planning to avoid paying more tax. Tax saving investments like Public Provident Fund and National Pension Scheme, among others, also help the salaried employees to save some money. As the financial year 2022-2023 is coming end in just three months, it is important to know effective ways to claim more exemptions while filing Income Tax Return (ITR) for FY23.
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Here are five easy ways to save more tax:
1. House Rent Allowance (HRA)
House Rent Allowance (HRA) is a salary component for a majority of employees. However, unlike a basic salary, HRA is not entirely taxable. A portion of HRA is exempt under Section 10 (13A) of the Income Tax Act of 1961, subject to specific conditions. Before calculating gross taxable income, the HRA exemption amount is subtracted from the total income. If an employee lives in his own house or does not pay any rent, the HRA received from the employer is fully taxable. A salaried employee living in any of the metro cities is eligible for 50 per cent exemption on HRA.
2. Children Education Allowance and tuition fees
Tax exemption is available to salaried employees for children education allowance and tuition fees. Under education allowance Rs 100 per month per child upto two children is exempt from taxable income while deductions upto Rs 1.5 lakh are available under Section 80C for tuition fees paid towards the tuition fees of upto two children.
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3. Relocation Allowance
Companies and government agencies both may ask their staff to relocate to another city for official purposes. Reimbursements made by the employer for the initial 15 days towards lodging and train/air tickets, as well as car transportation costs, registration fees and packaging fees are exempt from income tax.
4. Leave Travel Allowance
Taxpayers can claim an exemption for the expenses towards tickets booked for a trip within India. The deductions can be claimed for the taxpayer and family members on the travel expenses. Under LTA the employees can avail the benefit twice in a block of 4 years.
5. Books and Periodical Allowance
The reimbursements towards the expenses incurred on purchase of newspapers, magazines, books, etc. are covered under the books and periodicals allowance. An employee can claim the exemption for the actual bill amount or the limit specified in the cost to company (CTC), whichever is lower.
