How to pay zero tax and get tax free income for over Rs 10 Lakhs in INDIA?
How to pay zero tax and get tax
free income for over Rs 10 Lakhs?
Last week I
wrote article about how one can save income tax upto Rs 5 Lakhs of his
income and there was very good response from readers. However ... what if you fall under 30% tax
bracket. I was wondering whether you can save income tax of over Rs 10 Lakhs
income. I was analyzing various avenues to save income tax and felt there was
scope to save income tax for over Rs 10 Lakhs income.
What are the
various ways where we can get tax free income of over Rs 10 Lakhs ? How to pay
zero tax for over Rs 10 Lakhs income? I found some answers, easy to implement and may be very useful for all. Continue read on…. :-)
How to pay zero tax and get tax
free income for over Rs 10 Lakhs?
Well, whatever
I am indicating is a legal way to get tax free income for income over Rs 10
Lakhs income. You may or may not implement all these options as there are some
dependencies on your employer too, but you can try and get maximum tax
exemptions and earn tax free income and pay almost zero tax upto Rs 10 Lakhs
income.
# 0 – Your basic income tax
exemption – Rs 250,000
I would not discuss
much about this as it is basic exemption.
# 1 – Claim 80C Exemption for Rs 150,000
Following are the eligible deductions u/s 80C.
·
Children tuition fees. No
transport allowance / term fees are allowed as deduction.
·
Amount deposited in Public
Provident Fund. You can open PPF account with any post office / SBI / ICICI
Bank etc.
·
Amount contributed towards
the Employees Provident Fund (EPF)
·
Post office term deposit
for 5 years / Bank FD scheme of 5 years.
·
National Saving
Certifications (NSC) – 5 years and 10 years
·
ELSS tax saving Mutual
Funds.
·
Senior Citizen Savings
Scheme from post office / bank
·
Principal repayment of
Home Loan amount
·
National Pension System /
New Pension Scheme (NPS)
·
Life Insurance Premium
·
Amount deposited in
Sukanya Samriddhi Account
2) Claim additional deductions
under 80CCD towards NPS Rs 50,000
Employees can
contribute to New Pension Scheme / National Pension Scheme (NPS) up to 10% of
their salary. In such case, an employee is eligible to claim additional Rs
50,000 tax benefits over and above 80C. Hence max limit 80C + 80D would be Rs 2
Lakhs.
3) Employer contribution of NPS –
Rs 100,000
Many employers
are willing to help employees by contributing to schemes like NPS where
employees would get tax exemption. Have you checked with your employer whether
they can contribute to NPS and deduct from your total CTC (Cost to the
company)? They can contribute up to 10% of your salary. This is a good way to
claim tax exemption and get the highest interest rate with this safe investment
scheme.
4) Claim interest on house
property loan upto Rs 200,000
If you have
taken house loan, you are eligible to claim interest on home loan (which is
termed as loss from house property) up to Rs 2 Lakhs. This is only interest
from housing loan. You can fulfill your dream as well as get income tax
exemption.
5) Exemption of Transport
Allowance for Rs 19,200 per annum
From next
financial year 2015-16, the transport allowance exemption has been increased to
Rs 1,600 per month / Rs 19,200 per annum. You need not produce any proofs for
this, but just claim as an exemption.
6) Exemption for Health insurance
premium up to Rs 25,000
You can
subscribe to a good health insurance plan and claim health insurance premium
exemption up to Rs 25,000 per annum. This would satisfy your basic need of
having a health insurance plan and also ensures that you claim relevant tax
benefits.
7) Medical allowance – Rs 15,000
You can submit
medical bills to your employer and claim upto Rs 15,000 as medical allowance as
part of your total compensation (CTC). In case your employer does not allow for
this deduction, you can claim this amount as exemption while filing income tax returns
and claim as exemption.
8) Medical insurance premium for
parents – Rs 30,000
You can claim
the medical insurance premium for your parents as exemption upto Rs 30,000. Due
to increase of the cost of medical expenses, one has to mandatorily buy a good
health insurance for their parents. There is no choice, but you can claim this
as an exemption from your total taxable income.
9) Leave Travel Allowance – Rs
25,000
Many of us
tend to ignore this LTA (Leave Travel Allowance) which one can spend and claim
exemption up to Rs 25,000. While there is a guideline that you can claim LTA
twice in a period of 4 years, you can claim upto Rs 50,000 as one time in a 2
year period, hence an allocation of Rs 25,000 per annum is done here. Note that
this amount would depend on the employer and may change from employer to
employer.
Tax Free
Allowances / perquisites
Below are some
of the tax free allowances / perquisites which employers are providing these
days. They would depend on an employer to employer. You can claim to maximum
extend to enjoy tax benefits.
10) Fuel expenses reimbursement
upto Rs 100,000
Many employers
provide fuel expense reimbursement for their employees depending on their
grade. While at junior level, it may be at Rs 30,000, for employees who are
earning above Rs 10 Lakhs per annum, employers are providing Rs 1 Lakh fuel
expenses at a minimum. I have not considered any car schemes here, and this is
simply fuel expense reimbursement which could be based on actual.
11) Phone / Mobile expenses
reimbursement – Rs 30,000
Many employers
provide reimbursement of phone and mobile bills to the tune of Rs 30,00 per
annum as part of the CTC structure. I heard in some companies, it is over Rs
50,000 per annum. I have considered Rs 30,000 on the conservative side.
12) Newspaper / Magazine
reimbursements – Rs 14,000
Many employers
are giving reimbursements of newspaper / magazine to the extent of Rs 14,000
per annum for senior employees earning over Rs 10 Lakhs per annum. Some
companies are restricting only to magazine cost reimbursement. One can claim
this as part of their CTC. I have taken this average after inquiring with some
of my friends who are working in MNC and large companies.
13) Meal Coupons / Sodexo coupons
– Upto Rs 36,000
Many MNC
companies are providing Sodexo coupons as part of their CTC structure. If you
are not encashing such perquisites provided by your employers, you are missing
something and paying unnecessary taxes. I have taken this amount on the low
side as some are providing this as just Rs 1,000 per month, but some MNC
companies are providing Rs 3,000 per month.
Conclusion:
I am not
saying that these are provided by all employers. But to the maximum extent,
many Multi National Companies / IT companies / staffing companies are providing
these benefits to their employees. One should encash them and see how they can pay zero tax and get tax free
income for over Rs 10 Lakhs income.
