How to save Income Tax on Income from salary?
Income Tax Planning

How to save Income Tax on Income from salary?

There are many comic instances when the income tax paid by a salaried person exceeded that of an industry. The difference is that all businesses have their own accounting system and professional accountants who know the nuances of the taxing system. A person whose income is the salary, think that merely submitting Form ITR-1 Sahaj online is enough to complete his or her duty as an honest tax payer. The act of e-filing the required form doesn’t save on remittances that could have been avoided if done through a professional accounting company.

How Does a Tax Professional Save You From Taxes

The following savings are exempt from taxes.

i) Interest on home loan.

ii) Health insurance premiums.

iii) Contributions to the national pension scheme.

iv) Rent paid from your income.

v) Contributions to charitable organizations.

 

The 1.5 Lakhs Limit of Section 80C

 

Some investments made by the salaried individual will save salary from tax.

 

i) Interest received from Public Provident Fund (PPF).

A salaried person can open a PPF account in all post offices and most of the banks. The current interest is 8% which is tax free

ii) Returns from ELSS Mutual Funds

All gains from ELSS investments are exempt up to Rs. 1 Lakh. 

iii) National Savings Certificates (NSCs)

Save income tax in salary by deducting the interest received from NSCs.

iv) Life Insurance Premiums

Another idea that can be included while e-filing to reduce income tax is the premiums of insurance policies.

v) National Pension System (NPS)

All contributions to the NPS shall be counted for 80CCD exemption.

vi) Home Loan repayment

vii) Tuition Fees.

Tuition fees paid for a salaried person’s children are exempt from income tax.

viii) Sukanmya Samriddhi Yojna

All payments into SSY by salaried parents of a girl are eligible for tax deduction. 

 

The chart shows the tax slabs and the amount incurred in ITR filing for salary. This is for the financial year 2020 – 21 for which the assessment shall be done in 2021 – 22.

 

Salary Range

Tax Payable

Up to Rs 2,50,000

No tax

Rs. 2,50,001 to Rs. 5,00,000

5%

Rs 5,00,000 – Rs 7,50,000

10%

Rs 7,50,000 – Rs 10,00,000

15%

Rs 10,00,000 – Rs 12,50,000

20%

Rs 12,50,000– Rs 15,00,000

25%

Above Rs 15,50,000

30%

 

Filing Your Tax Returns

 

The useful resources include forms 16 and 26 AS. The latter will be provided by the income tax department after ITR filing for salary. 

A person who is well aware of section 80C of the income tax act can find ways to reduce his or her gross income by up to Rs. 1, 50, 000. The subsections 80D, 80E, 80GG, and 80U will introduce the assessed person to many other deductions. Having an in-depth knowledge about these will help a salaried individual in e-filing to reduce income tax.

 

This is where a professional company that specializes in filing income tax on behalf of salaried people comes into play. They will ensure that you pay only a fraction of what should have been paid. Making a smart move by going to a reputed company will save axes for salaried individuals.

 

What Other Rules Are Used to Reduce Tax

An experienced financial company well versed in ITR filing for salary uses many ways to reduce your taxable income. 

 

Section 89(1) of the Income Tax Act

This act has made provisions to save taxes for salaried individuals from the below mentioned incomes:

 

i) Receipt of family pension in arrears.

ii) Salary advances that were received.

iii) Arrears of salary.

 

All these calculations along with good advice for future IT filing that will drastically diminish the payable tax for a salaried person can be had at very attractive service charges from a tax practitioner who is well aware of the taxing system. 

 

Drafted By:

CS.A.Maniraj.,B.Com.,ACS.,CA(Fin), Independent Director 

Certified CSR Professional., Certified GST Professional.

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