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Deduction from Taxable Salary

Kapil Sethia (Vice President) (22 Points)

17 February 2020

What are the tax benefits available to Salaried individuals under various categories.

what are effective ways of Tax planning for Salaried individuals

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4 Replies

Kapadia Pravin (17249 Points)
Replied 18 February 2020

Tax planning days are no more relevant now since introduction of new tax regime for higher salary earners. effective from FY 2020-2021.

Note that under new tax regime almost no deductions are allowed under 80C 80D Standard deduction, profession tax , housing loan interest under 24(2) etc.

New tax slab rates applicable from FY 2020-2021 are attractive for higher salary earners and for those who are not keen to block funds by investing to reduce tax liability as more or less it is offset by new tax slabs and that too without blocking funds.

debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 13 April 2020

Tip 1 – Take a good look at Section 80C
When it comes to taxation of salaried employees, perhaps no section is a bigger ally than Section 80C. So the biggest tax planning tip for salaried employee is to take a good look at Section 80C to maximize take-home salary, legally ‘reduce’ income tax rate and lower tax payout.

Section 80C comes with a broad range of options to help individuals lower tax liability.

Section 80C offers as much as Rs 150,000 in terms of tax benefit, which tells you how important it is for taxpaying individuals.
Tip 2 – Start with Rs 150,000
Make Rs 150,000 your starting point and work backwards by considering the most suitable options like life insurance, PPF (public provident fund), tax-paying mutual funds, NSC (National Savings Certificate) and so on.

The investment plans and allocations depend primarily on your financial goals, risk profile and income levels. Your financial planner should be helpful over here. He can guide you on how to make the most of these options.
Tip 3 – Begin with the most important options
While reviewing Section 80C benefits, go for options that you would take anyway, even if there was no tax benefit. Typically this would include life insurance, employee provident fund (EPF) – should your employer qualify for the same, tuition fees and so on. Deduct all these from the Rs 150,000 starting point.
Tip 4 – Move to the second rung options
Once you have got the most important options out of the way, it’s time to take a close look at the second rung. This would typically include tax-saving mutual funds and ULIPs (unit-linked insurance plans) if you are the risk-taking type or PPF and NSC if you prefer low risk options.

By the same token, contribution to New Pension Scheme (NPS) – under Section 80CCD – a sub-section of Section 80C, also qualify for tax benefits.
Tip 5 – Have you taken a home loan?
If you have availed a home loan, you can claim tax benefits under Section 80C by furnishing proof of principal re-payment on the home loan.

You can also claim tax benefits under Section 24 towards interest payment on the home loan.
Tip 6 – Don’t forget the other sections
While Section 80C seems to hog most of the footage, so to say, when it comes to tax-planning there are other sections that can save a bundle on taxes.

Taxolawgy (Legal and Financial services) (491 Points)
Replied 13 April 2020

Hello, There is a crowd of valid and legal ways of tax-saving tips which will come handy under the Income Tax Act, 1961. You can read tax saving tips in India blog for more information on Tax benefits and saving tips for salaried employees.

Taxolawgy (Legal and Financial services) (491 Points)
Replied 13 April 2020

And as per the benefits are concerned, here they are-

1. Exemption of House Rent Allowance

2. Standard Deduction

Section 80C, 80CCC and 80CCD(1)

Some of such investments are given below which are eligible for an exemption under Section 80C, 80CCC and 80CCD(1) up to a maximum of Rs 1.5 lakh.
Life insurance premium
Equity Linked Savings Scheme (ELSS)
Employee Provident Fund (EPF)
Annuity/ Pension Schemes
Principal payment on home loans
Tuition fees for children
Contribution to PPF Account
Sukanya Samriddhi Account
NSC (National Saving Certificate)
Fixed Deposit (Tax Savings)
Post office time deposits
National Pension Scheme

Medical Insurance Deduction (Section 80D)

Interest on Home Loan (Section 80C and Section 24)

Deduction for Loan for Higher Studies (Section 80E)

Deduction for Donations (Section 80G)

Deduction on Savings Account Interest (Section 80TTA)

Additional Deduction for Interest on Home Loan (Section 80EE)

Income tax exemption on relocation allowance

Leave Travel Allowance (LTA)