Use of right tax exemptions ensures more money in hand and less income tax.
Around this time of the year, people are busy exploring ways to save taxes, and Section 80C is the most popular way to do it. However, most times people fail to maximize their tax savings as they don’t look beyond Section 80C. Here are some lesser used tax saving avenues to ensure you make your salary highly tax efficient.
1: House Rent Allowance (HRA)
If you live in a rented accommodation, you are liable to receive income tax benefits on the HRA which is a common component of the salary structure. The HRA tax benefits you can avail as a salaried individual is the minimum of
• Actual HRA received or
• Excess of rent paid annually over 10% of the annual salary
• 50% of the basic salary plus DA if located in metro cities and 40% of the basic salary plus DA for other cities.
Tip: Makes sure you have all rent receipts from your landlord. For annual rent exceeding Rs. 1 Lakh, you have to submit a copy of your landlord's PAN card.
2: NPS contribution
You can earn tax benefits from your employer’s contribution towards your NPS account. Contributions up to 10% of your basic salary are fully exempted of taxes.
Tip: Investment in NPS is now made available using online eNPSonline subscriber registration and contribution facility.
3: Leave Travel Allowance (LTA)
This is an allowance given by an employer to the employees and is exempted from taxes under Section 10(5) of the Income Tax Act.
Leave travel allowance (LTA) is paid out as part of the salary to cover annual travel expenses of an employee with his/her family. One can claim LTA for any two trips made in a block of four calendar years. The current block of four years commenced on January 1, 2014 and will continue till December 31, 2017.
TIP: The LTA covers only travel expenses. Expenses on international travel is not considered to be part of it.
4: Uniform allowance
Section 10 (14) (i) of the Income Tax Act allows tax exemptions if your job profile requires you to wear a dedicated uniform to work. The exemptions are applied to the attire allowance one receives as part of the salary structure.
Tip: In order to avail this allowance, you will have to submit bills for all uniform-related expenses to your employer for each financial year.
Employers reimburse expenses such as medical and phone charges for certain job profiles on furnishing bills. The reimbursement amount is tax exempted. However, this applies to regular expenses incurred for work purposes.
Tip: Conveyance allowance is offered to employees who do not get any transport allowance. For phone bills, one can claim up to 100% exemption against the billed amount on submission of actual bills.
6: Meal vouchers
Tea and snacks offered during office hours are tax exempted. Meal coupons or food vouchers are also exempted to the extent of Rs. 50 per meal. Companies usually offer coupons for two meals a day and an additional amount for tea and snacks.
Tip: Assuming you have two meal vouchers for two meals a day for 25 working days in a month, you can get tax benefits of Rs. 2500.
7: Allowance for professional pursuits
Section 10(14) of the Income Tax Act allows tax exemptions to a salaried individual on any research allowance granted for academic research and professional pursuits. The exemption has no upper limit and is available for all official purposes.
The author is CEO of BankBazaar