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.