source: photo by kelly sikkema on unsplash
when you opt to stay with the existing tax regime, you will eventually end up making various tax-free investments and expenses, most of which also secure your financial future. here are some simple ways you can save tax on your salary in 2021.
there can be various components within the salary structure from which you can derive tax benefits. it includes,
house rent allowance (hra) – you can claim an exemption on the house rent paid subject to the lowest of,
i) actual hra,
ii) rent paid minus 10% of basic salary + dearness allowance, or
iii) 40/50% of basic and da.
retain the proof of rent paid to avail this benefit.
● standard deduction of ₹ 50,000.
● leave travel allowance can be availed twice in a block of four years, on domestic travels.
● mobile and telephone reimbursements.
● reimbursements on books and periodicals.
● meal or food coupons of up to ₹ 50 per meal.
section 80c provides tax savings of up to ₹ 1.5 lakhs in a variety of investment and expenses, including tax-saving fixed deposits, public provident fund, employee provident fund, national pension scheme, national saving certificate, insurance premium payment, children tuition fees, sukanya samriddhi yojana, repayment of home loan principal amount, etc. tools like the ppf return calculator can help you find your suitable investment amount.
● section 80 ccc offers a deduction on premium paid for annuity plans with an insurer.
● section 80ccd offers a deduction for an employee’s contribution to a pension account, including self-contribution to nps.
● section 80d allows deduction on payment of medical insurance premium of self, spouse, dependent children, and parents.
● interest on home loan is separately deductible under two sections for a maximum of ₹ 2 lakhs and ₹ 50,000 respectively. similar to a ppf calculator, there are home loan calculators to help with your calculation.
● you can also claim a deduction for interest on loan taken for higher studies.
● interest up to ₹ 10,000 earned on the savings account can be claimed as a deduction.
● reimbursements received on relocation expenses can be claimed as an income tax exemption.
● notice pay reimbursements can be claimed as an exemption, as joining bonus can be received, provided you had to pay the previous organization for the brief notice.
● facilities provided by the employer like cab facility, health club facility and gifts or vouchers provided by the employer are not taxable
● medical expenditure incurred outside india by the employer on the employee or employee’s family is exempt from tax subject to conditions.
apart from these tax benefits, you will also be able to claim a deduction on donations paid to recognized charitable organizations. you can use the cred ppf maturity calculator to find out your ideal tax-free investment amount. by planning and prudently using the various deductions and exemptions provided under the income tax act, you can save a significant amount of tax in the next financial year.