The Hardest Thing to understand in the world is Income tax??
Especially in our country now it is all the most confusing with the introduction of new tax regime??
I don’t think so. Let me make it very easy for you to understand and make the best of it by saving Tax as well as Growing your Money too….
Let us understand first the existing tax rate for working individual
| Income Slabs | Tax Rate |
1 | Income up to Rs. 2, 50,000 | Nil |
2 | Rs. 2,50,001 to Rs. 5,00,000 | 5% |
3 | Rs. 5,00,001 to Rs. 10,00,000 | Rs. 12 ,500 + 20% |
4 | Above Rs. 10,00,001 | Rs. 1,12,500 + 30% |
However, government has allowed tax exemptions on the following:
HRA: House Rent Allowances
A salaried individual having a rented accommodation can get the benefit of HRA. This could be totally or partially exempted from income tax. However, if you are not living in rented accommodation and still continue to receive HRA, then it will be taxable.Salaried individuals, who live in rented houses, can claim the House Rent Allowance (HRA) to lower their taxes – partially or wholly. The allowance is for expenses related to rented accommodation. If you don’t live in rented accommodation, this allowance is fully taxable.
Standard Deduction:
Standard deduction of Rs. 50000 is exempted in the income tax, which also includes transport allowance and medical expenses.
Standard deduction means a flat deduction to individuals earning salary or pension income. It was introduced back in Budget 2018 in lieu of exemption of transport allowance and reimbursement of miscellaneous medical expenses.
LTA: Leave Travel Allowances
As the name itself suggests, it is an exemption for allowance/assistance received by the employee from his employer for travelling on leave. Though it sounds simple, many factors need to be kept in mind before planning the travel for the purpose of claiming LTA exemption. Income tax provision has laid down rules with respect to claiming exemption of LTA.The income tax law also provides for an LTA exemption for salaried individual. LTA only covers domestic travel not an international travel. The mode of such travel must be railway, air travel or public transport.
You can claim 2 times in 4 consequent years for eg from 2016 to 2020 – you can claim Tax exemption only for any 2 years. If you have not claimed any year from previous 4 years, which means from 2012 to 2016 you have not claimed the LTA then you can claim for all the 4 years from 2016 to 2020 as it gets added
Mobile Reimbursement:
A tax payer may incur expenses on mobile and telephone used at residence. The income tax allows claiming a tax-free reimbursement of expenses incurred.Generally, telephone reimbursement provided to employees is not taxable according to Rule 3(7)(ix) of the Income Tax Act. If your office work demands a mobile/telephone/internet connection, you can claim a 100% exemption on the billed amount. The telephone connection covers both landline and mobile connections.
Books and Periodicals:
Expenses reimbursed incurred on books, newspapers, periodicals, journals and so on are tax free.Employees can claim reimbursement of expenses incurred on books, newspaper subscription, periodicals, journals and so on. These reimbursements are tax-free for employees. The maximum amount of reimbursement is limited to,Actual bill amount, orAmount provided for books and periodicals in CTCWhichever is lower.
Food Coupons:
Employer may provide with meal coupons which is taxable as perquisite in the hands of the employee. However, the tax is exempted on 2 meals each day up to Rs. 50 per meal. Many employers provide food coupons to their employees as perquisites. These food coupons are exempt from tax up to Rs 50 per meal. So, if the whole month is considered based on 22 working days and 2 meals a day, the monthly benefit will be Rs 2,200 (Rs 50*22*2). Employees can avail this tax benefit and claim Rs 26,400 under tax-free food coupons in a financial year.
All the views in the blog is personal of the author not attributing to any one.
