The last few years, salaried individuals have not got any major relief from the government in the form of tax breaks. Those in the higher tax bracket end-up paying a lot of taxes to the exchequer.
However, there are ways in which you can save tax through smartly structuring your salary. This will also increase your take home pay.
Here are 7 ways in which you can reduce tax from salary and increase take home pay.
Make sure your salary has LTA component
It is important to study the break-up of your salary before you start work. Negotiation of salary is important, but, equally important is the break-up. If it does not include tax free allowances, you will end-up paying more tax.
You can get Leave Travel Allowance for travelling expenditure in India. It is exempt two times in a block of four years. This exemption can be claimed once in period of two years
Check with your company if they offer meal coupons like Sodexho and Ticket Restaurant. These are tax exempted up to Rs 50 per meal.
So, it can go to Rs 100 per day and assuming you work for 25 days, you can get a tax exemption of Rs 2500 per month.
So, if you are in the 20 per cent tax bracket you can save up to Rs 6000 per year and Rs 10,000 per year in the 30 per cent tax bracket.
Exemption up to Rs 15000
Your salary income should include medical allowance, which gives you tax benefit of Rs 15000 per year. However, you need to produce physical copies of the original bills.
High tax break
Depending on the city you are in, you can get a big tax break if you are paying rent. You need to produce rental receipts and also the PAN card of your landlord. For metropolitan cities the tax break is higher.
Sec 80C benefit
Opt for higher amount of PF contribution, as you can get tax benefits Under Sec80C of the Income Tax Act.
Tax break of up to Rs 1600
Make sure that your salary has a component of travel allowance. This is exempt by Rs 1600 per month. If it is lower, ask the company to keep it at Rs 1600 to get full tax benefits. In any case travel expenses these days is almost always above Rs 1600.
Adhere to the timeline
Companies normally ask for tax declaration. Make sure that this is submitted on time or else they would start cutting TDS from salary.