How to save income tax in India:
Many households are facing liquidity crisis amid the coronavirus
pandemic because salaries have taken a hit. In these times your tax outgo could
create further problem for you. How to reduce the tax burden in current times
when rebates on your House Rent Allowance (HRA), Leave Travel Allowance (LTA)
have gone.
Here are a few questions first:
> How have taxes increased in the work-from-home situation
> How to claim tax-free components of your salary; is it advisable to opt
for a new tax system? Here is what you must do to save your money:
Tax-free components of salary
1.
HRA
2.
Conveyance Allowance
3.
LTA
4. Entertainment Reimbursements
5. Telephone and broadband services
Shifting to your parent’s house will save your money but you will now
have to pay tax on your HRA. Tax exemptions are there under Section 10(13A) of
the Income Tax Act & you can avail it on producing the rent receipts.
Since there are travel restrictions in place, claiming your LTA will be
difficult. You can claim tax benefits twice in four years. Many companies are
giving an option of giving LTAs along with the salary. You will get LTA after
deduction of tax. Conveyance reimbursement is also given on production of
receipts. Same is case with the entertainment reimbursement. Many people have
stopped eating outside.
Should you opt for the new tax system
or stick with the old one?
1.
You can opt for the new income tax
system if you have still not submitted your bills
2.
No tax-free components in new
system
3.
HRA, LTA taxable components of
salary
4. You can opt for new system if unable to show proofs of expenditures
5. Carefully see which tax system suits you
What is absent in new tax system
1.
Standard Deduction -Rs 50,000
2.
HRA -Rs 2 lakh
3.
80C Deduction -Rs
1.5 lakh
4. 80D (Medical Insurance) –Rs 50,000
5. 80EE (Housing Loan Interest) -Rs 50,000
How to reduce burden :
- Employees working from home should get some tax benefits
- Tax benefits on things like laptop printers and computers
- Employees can renegotiate salaries with employers
- Flexibility in tax components. Employees should be allowed to allocate expenses in components where the expenses are less
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