Salary is the very means of one’s survival. One cannot afford to lose it. Salaried class people always find it difficult to pay tax. With the coming of tax-paying season, the salaried class gets devastated. So today we have mentioned some ways in this post by which you can pay zero tax on your salary.
It is very important to understand the tax slabs and components of salary breakup.
So here’s a quick guide on how to pay zero tax on salary?
The salaried class residing in a rented complex/flat can claim House Rent Allowance to lower the tax on their taxable income.
Let us understand HRA with an example.
Shivam works at an organization namely Maya Infomatics in Delhi. His organization provides him HRA. However, he lives in his own house with his family.
How to make use of HRA?
Shivam can simply pay the rent to his parents and claim the allowance. He has to enter into a rent based agreement with his parents and transfer money to them at the end or beginning of each month as the case may be. This is an easy way of saving money on taxes.
Let us learn about Leave Travel Allowance
The salaried class can get an exemption for trips within India. It is valid only for short-distance trips. You need to submit the bills to your employer to avail of the exemption. Without taking the trip, you cannot claim it.
A bonus is a non-financial incentive. It is fully taxable.
Professional tax is always allowed as a deduction from your taxable salary income. It is also known as the tax on employment. It is levied by the state. The maximum amount which can be levied by it is Rs. 2500.
Always remember that pensions received from United Nations Organisation is fully exempt.
It is not that emotionally easy to pay taxes from our hard-earned money. However, there are various measures through which one can pay zero income tax on their salary.
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The salaried class gets disgusted with new propositions and amendments in tax laws. It is very crucial to have a coordinated and well-established salary structure.
It is very important to invest the same in a wise way. There are numerous provisions in the Income Tax Act that allow us to manage our CTC ( COST TO COMPANY ) and it’s further elements which will help in reducing our tax liability.
According to the newly made budget, taxpayers get two options:-
- Taxpayers can pay according to the former regime and completely utilizing the exemptions, allowances, and deductions provided in the IT Act.
- We can let go of almost every allowance and deductions in favor of paying tax at a lesser rate than the former regime.
The Income Tax Act provides us with many tax benefits on our certain expenses as an employee towards our organization.
Ultimately these will get deducted from out taxable salary income.
These amounts are actually paid to the employees by our organizations and thus get included in our CTC.
According to Section 10(14) of the Income Tax Act, there are certain conditions in order to avail the allowances, tax-free.
Deductions include expenses paid in the form of life insurance premium, school fees, tuition fees, and so on. 150000 is the maximum exemption which can be claimed under that section.
According to Section 80(D), you get exemptions for undertaking Mediclaim policies ( up to a certain amount ).
Some other sections which deal with deductions from our taxable salary income are:-
- Section 80 DDB which allows medical expenses to be treated as a deduction.
- Section 80 E allowing interest on education loan as a deduction.
- Charity in the form of a
- Donation is also accepted as a deduction.
- Section 80TTA allows 10000 as a deduction on interests earned on a savings account.
You need to have the right salary structure. You must have a plan to invest in the right Tax saving plan.
Salary structure is the key to save taxes.
However, most employees and employers have a flexible salary structure which allows them to get tax deductions.
Gift vouchers up to Rs 5000 are tax-free. Organization owned cars give tax benefits to the salaried class.
You can simply invest fifty thousand rupees in the National Pension Scheme to get deductions.
Paying Medical Insurance Premium is very fruitful for the persons having a desire to tax on their income.
You can also invest money in EPF so as to get a deduction from your taxable income.
As stated earlier, the former tax slabs are unchanged.
If you belong to the salaried class, there are numerous ways in which you can reduce and pay tax to zero on salary.
- Get deductions up to 150000 as per Section 80C.
- You can invest the same in your PPF, EPF, and so on.
- You also get a standard deduction.
- Investing money in NPS is considered to be the most effective way. You can get a deduction of Rs 50,000.
- Try gaining maximum benefit from HRA and Home loan.
- Make proper use of food coupons to save taxes.
There are various tax-free components like car maintenance, mobile bill reimbursement, gift vouchers, education allowances, journal allowances, and so on.