Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Ways to reduce income tax as much as possible?

Rahul (Mr) (54 Points)

05 May 2022

Hi All,

My friend's salary break up is as below:

CTC Breakup
BASIC	997500
HOUSE RENT ALLOWANCE	498750
BONUS	42000
BENEFITS PLAN	356175
ADDITIONAL ALLOWANCE	488308
PROVIDENT FUND (EMPLOYER CONTRIBUTION)	119700
GRATUITY	52967
HEALTH BENEFIT (NOTIONAL AMOUNT)	9600
VARIABLE PAY	285000
TARGET COST TO COMPANY (PER ANNUM)	2850000

He's getting an interest on Savings Account/FD of around Rs 300000 - 350000 PA.
He invests Rs 150000 in PPF.

What other options are there to reduce the tax as much as possible?
Please explain in detail.

Thanks in advance!

Reply
Follow
Share

13 Replies

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 05 May 2022

Tax planning works to some extent only ..One has to pay tax if income is earned ..

Based on the above data 10000/- deduction is available u/s 80TTA

Standard deduction 50k.

Submit rent bills / rent agreement if available.

You may submit parents medical bills

Housing Loan details can minimum the tax as a part of tax planning.

1 Like

sabyasachi mukherjee (26219 Points)
Replied 06 May 2022

What about ppf it's exempted from gross total income. so no taxable income.

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 06 May 2022

PPF is already taken in the query.. Queriest asked other options

1 Like

Samantha J (1236 Points)
Replied 07 May 2022

Convert FD into mutual funds . This will save interest income of Rs 350000!
Get medical insurance saves premium under 80D.invest in NPS saves 50000.Gratuity not taxable.Opt for company lease house HRA doesn't apply and self contribution to leased house deductible . Break up additional allowance into categories like uniform, child education etc which can fetch deduction s under relevant sections.

2 Like

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 07 May 2022

Rahul (Mr) (54 Points)
Replied 09 May 2022

@ Eswar Reddy S @ sabyasachi mukherjee If he shows that he's paying Rs 600000 per annum rent to his parents, tax on his HRA will be 100% exempted.

His parents are senior citizens and don't have any source of income.

Do you guys see any problem with this? Can there be any issue raised by the IT department in this case?

Does he needs to mandatorily transfer rent to his parent as proof?

Rahul (Mr) (54 Points)
Replied 09 May 2022

@ Samantha J How will converting FD to MFs will save interest income?

Income Tax Wala: (Fin. Expert) (Chartered Accountants) (2015 Points)
Replied 10 May 2022

Originally posted by : Rahul
	@ Eswar Reddy S @ sabyasachi mukherjee If he shows that he's paying Rs 600000 per annum rent to his parents, tax on his HRA will be 100% exempted. His parents are senior citizens and don't have any source of income. Do you guys see any problem with this? Can there be any issue raised by the IT department in this case? Does he needs to mandatorily transfer rent to his parent as proof?

no problem, subject to that house is name of parents. and you file return of parents with showing this rental income.

1 Like

Samantha J (1236 Points)
Replied 10 May 2022

FD earns interest every year. MF LTCG STCG arise only if you redeem.

1 Like

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 10 May 2022

194IB may attract if rent per month is more than 50k

1 Like

Rahul (Mr) (54 Points)
Replied 11 May 2022

@ CA SUDESH KUMAR GUPTA @ Eswar Reddy S - The house is currently registered in his parent's name. He will show rent paid to his parents for tax exemption in HRA and will also disclose the rental income while filing his parent's ITR.

Does he need to maintain any proof of rent transfer to his parent?

Is it possible that the IT dept. in future may ask for proof for rent payments?

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 11 May 2022

As long as scrutiny doesn't come nothing will happen..

If the ITR is selected for scrutiny then rent to parents may trouble you

debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 13 May 2022

Save Income Tax on Salary

Deductions under Section 80C, Section 80CCC and Section 80CCD. Citizens of India can save tax under these 3 sections.
Medical Expenses.
Home Loan.
Education Loan.
Shares and Mutual Funds.
Long Term Capital Gains.
Sale of Equity Shares.
Donations.