If you’re a salaried employee, part of what your employer pays you go towards professional tax. And if you think that’s a lot, it’s not just your employer who pays taxes on your salary: You do too. The good news is that Indian citizens have various ways to save on tax, such as form 15G 15H. In this post, we’ll look at specific critical strategies for saving on income tax on your monthly income.
House Rent Allowance (HRA)
To claim HRA, you need to be a resident of India and live in rented accommodation. The HRA is a tax exemption the government provides for people who pay rent for their house/apartment. It can be claimed as an additional deduction from your taxable income and hence saves you from paying taxes on it. The exemption amount under this section is limited to Rs 1 lakh per annum.
Leave Travel Allowance (LTA)
The LTA is an exemption from Income Tax to the extent of expenses incurred in traveling within India. It can be claimed only for the shortest distance on the trip and not for long distances like Mumbai-Delhi or Chennai-Kolkata. Employees are required to submit bills of incurring expenses, if any, to their employer so that they can be submitted as proof while filing your ITR form.
Employee Contribution to Provident Fund
The employee contribution to Provident Fund is considered part of the salary. Under this scheme, employers and employees contribute equally every month towards employees’ pension. Generally, it is 12% of the basic salary, which can be either withdrawn as a lump sum at any time or used for investment after maturity in a bank/investment company scheme approved by EPFO. The returns are gained upon maturity and exempted from taxes, and all contributions to EPF can be claimed for professional tax exemption as per section 80C of the Income Tax Act 1961.
Expenses Related to Internet or Phone
To claim exemption, the expenses have to be incurred on a daily basis. If you use a phone for personal and official purposes, you can claim a deduction for the portion used for official purposes. This includes the internet and other communication devices such as email accounts, text messages, etc., but not landline phones only (unless it’s your only means of communication).
If you have opted for a medical insurance plan, the maximum amount that can be claimed as an income tax deduction is Rs. 25000 in case of a self-funded health cover plan and Rs. 50,000 if it’s an employee-sponsored scheme.
If your parents are senior citizens (aged 80 years or above), they can also claim exemptions on their taxes under Section 80D of the Income Tax Act. This section provides an exemption from paying tax on any premium paid by them as part of their medical insurance plan as long as it covers both them and their spouse/children, who are also covered under this scheme.
Under section 24 of the Income Tax Act, interest paid on home loans can be availed for tax deductions of up to Rs. 2,00,000. The loan must be taken to repair, renew or reconstruct a property or any other purpose specified in the policy of insurance under which such loan has been provided.
If you are paying for maintenance and repairs on your house or apartment building with the help of this type of loan, then it will not qualify as a home loan, but if you need some other kind like purchase or construction, then this will be eligible as home loan too!
Tax deductions are available under Section 80C(1) for up to Rs. 1.5 lakhs.
Tax deductions can be gained for interest paid on education loans, provided the interest is paid from your salaried income. If you are unable to pay such an amount from your salary, then it must be availed off from an approved charitable institution or a financial institution. The loan must be taken for the taxpayer, their spouse, or children and can be availed only under Section 80C of the Income Tax Act, 1961. Deductions can be claimed from the year you start paying the interest for the loan and can claim for another seven years.
Mutual funds are a great way to save money and invest in the stock market. A mutual fund is an investment scheme that pools investors’ money together and invests it in different securities (stocks or bonds) to generate returns. You can buy shares directly from an insurance company or a bank or through a mutual fund dealer who will then sell them on your behalf.
Mutual funds are managed by professional money managers who make decisions about how much to buy and sell based on their analysis of market conditions, so you don’t have to worry about this too much if you choose one of these products—you’ll get professional advice from experts who know what they’re doing!
The best part about investing in mutual funds? They offer significant tax benefits for individuals like yourself: if your investments total Rs 1-5 lakhs each year under Section 80C, then this will qualify for up to Rs 1.5 lakhs worth of deductions from your taxable income. This means that not only does invest through these channels help increase financial security, but it also saves taxes on top of that.
The salary structures in India are quite complex. In order to save on professional tax, you should understand the nature of income tax and how it affects different employees. You can also reduce your taxable income by making use of financial instruments such as mutual funds or insurance policies.
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