Income Tax News: Hurray! Salaried Individuals Earning Rs 12 Lakh PA Can Now Save 100% Tax, Check How

Income Tax News: Are you wondering how to minimize your income tax burden with a gross salary of Rs 12 lakh annually? Here’s a comprehensive guide to help you navigate through tax-saving strategies under the old tax regime.

Understanding Tax Deductions and Exemptions

When it comes to tax-saving, it’s crucial to make the most of available deductions and exemptions. Under the old tax regime, taxpayers can significantly reduce their taxable income through various provisions:

1. Standard Deduction (Section 16): Avail a standard deduction of Rs. 50,000.

2. Section 80C Deductions: Deduct up to Rs. 1,50,000 by investing in schemes like Life Insurance Premium, Provident Fund, etc.

3. Section 80CCD (1B) Deduction: Further reduce taxable income by Rs. 50,000 by contributing to the National Pension Scheme.

4. Section 80D Deduction: Claim deductions of up to Rs. 75,000 for health insurance premiums paid for self, spouse, children, and senior citizen parents.

5. Section 24(b) Deduction: Enjoy deductions of up to Rs. 2,00,000 on interest paid on housing loans.

Structuring Your Salary for Tax Efficiency

To optimize tax savings, consider restructuring your salary with your HR department:

• HRA and LTA: Allocate a significant portion of your salary towards House Rent Allowance (HRA) and Leave Travel Allowance (LTA).
• Reimbursements: Maximize reimbursements for expenses like telephone bills.

Calculating Taxable Income

Let’s break down how these strategies can help reduce your taxable income:

• For a gross salary of Rs 12 lakh, allocate Rs 3.60 lakh to HRA, Rs 10,000 to LTA, and Rs 6,000 to phone bill reimbursements.
• After standard deductions and exemptions, your taxable income reduces to Rs 7,71,500.
• Further deductions under Section 80C and 80CCD bring down your taxable income to Rs 5,71,500.
• Claiming deductions under Section 80D reduces taxable income to Rs 4,96,500, ensuring you pay zero tax.

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