Income Tax News: Salaried Professionals Earning Up to 12 Lakh Can Save 100 % Tax, Just Follow THESE Tips

Income Tax News: The New Year has begun. It is time to start fresh with your financial planning. But, first and foremost, efforts should be made to conserve tax for the current fiscal year. You can save money on taxes if you plan ahead of time. Believe me, if you prepare well, there will be no tax on your earnings, i.e. salary. That means no tax.

Understanding Income Tax Rules

Income tax rules allow for tax savings if tax deductions and exemptions are handled correctly. However, you must organise your compensation in such a way that the tax scope is not excessive. You can also receive additional reimbursement benefits. The issue now is that in order to avoid any salary tax, the coordination of investment and savings must be maintained. If your pay is Rs 12 lakh and you fully utilise reimbursement and investment tools, there will be no tax on the salary. The entire salary will be paid tax-free.

Optimizing Wage Structure for Tax Benefits

You still have the opportunity to adjust the wage structure. You can also seek this from the company's human resources department. There is a reimbursement cap. However, it may have several tools. Convance, LTA, entertainment, broadband bills, petrol bills and entertainment or food coupons can all be utilised to get reimbursed. All of these can help you save money on taxes. Aside from that, HRA can help you save money on taxes.

When claiming HRA, three figures are provided. Tax exemption will be granted on the lowest of these three. The HRA provided by the employer is divided between metro and non-metro cities in the compensation structure. HRA may be claimed up to 50% of the basic pay in a metro city and 40% of the basic income in a non-metro city. HRA is the amount that remains after deducting 10% of the basic pay from the total rent.

Unlocking Leave Travel Allowance (LTA) Benefits

The LTA benefit can be used twice in four years. This includes the plane ticket. This is equal to 10% of your base wage. On a basic salary of Rs 6 lakh, LTA of Rs 60 thousand will be provided. According to the annual average, tax exemption is available on Rs 30 thousand.

Basic Income Exemption

Under income tax laws, salaries up to Rs 2.5 lakh are not taxable. This means that no tax would be imposed on your entire remuneration up to Rs 2.5 lakh. But, in the end, it is calculated.

Standard Deduction

First and foremost, a standard deduction of Rs 50,000 will be allowed. In other words, take Rs 50 thousand off your pay.

Section 80C

Tax relief is available on investments up to Rs 1.50 lakh. It comprises mechanisms like as EPF, PPF, Sukanya Samriddhi Yojana, NPS, tuition costs for children, LIC, and home loan principal. If you use the entire limit, you can claim a deduction of Rs 1.50 lakh.

Section 80CCD(1B)

This allows you to invest an additional Rs 50 thousand in NPS.

Section 80D

By purchasing health insurance for yourself, you can save up to Rs 25 thousand in taxes. Aside from that, you can get a tax break of up to Rs 25 thousand on your parents' health insurance. This can result in a total deduction of up to Rs 50 thousand. If both parents are over the age of 65, the senior citizen deduction is limited to Rs 50 thousand. In this case, you can save up to Rs 75 thousand in taxes. You can currently save tax on a total of Rs 50 thousand in 80D.

Mastering Income Calculation

Now you know how to calculate taxable and non-taxable income.

HRA: This will provide tax exemption up to Rs 1.80 lakh.

Reimbursement: When all of the reimbursements are added together, the total reimbursement is Rs 1.98 lakh.

Deduction: There would be a total deduction of Rs 3 lakh available.

Leave Travel Allowance (LTA): A Rs 30 thousand tax relief would be available. There will be no tax deducted from your entire pay of Rs 7.08 lakh.

Income tax will now be zero

The annual remuneration totals Rs 12 lakh. There will be no tax on the first Rs 7.08 lakh. The remaining taxable pay is now Rs 4.92 lakh. Another income tax rule will now be introduced. If your taxable salary is less than Rs 5 lakh, you will be eligible for a rebate under Section 87A. There is a 5% tax on salaries between Rs 2.5 and Rs 5 lakh, but if the total taxable pay is less than Rs 5 lakh, a Rs 12,500 rebate is available on Rs 2.5 lakh. Following that, the remaining Rs 2.50 lakh will be kept within the standard exemption level.As a result, your full salary will be tax-free. As a result, your total tax is zero (0).

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