How to Pay Zero Tax for Income up to Rs 12 Lakhs from Salary for Financial Year 2017-18

Most of salaried individual do their tax planning at the end of the year, as many are not aware of what all options are available to save taxes. Very few start planning at the beginning of the year. The article will help individuals to plan their taxes well in advance so that can invest and plan in systematic manner much in advance. The Article gives you brief idea on how to save tax and at the same time make proper investment and cover insurance and Medical expenses risk.

 

Summary of all deduction and benefit an salaried individual can avail.

Pay Zero Tax for Income up to Rs 12 Lakhs from Salary for Financial Year 2017-18

Amount Rs

Basic Exemption

250000

PPF, Insurance, ELSS, FD, NSC, Etc (Section 80 C Deduction )

150000

Investment in NPS (Section 80 CCD 1B )

50000

Contribution of NPS By Employer (Section 80 CCCD 2)

150000

Home Loan Interest or House Rent Allowance (First Time Buyer )

250000

Tax Free Medical Allowance

15000

Tax Free Transport Allowance

19200

Medical Expenses for Self and Parents (80D)

50000

Leave Travel Allowance (Section 10(13))

25000

Travel and Fuel Reimbursement – Office Travel

120000

Phone and Communication (Tele and Internet Expenses)

36000

News Paper and Periodicals

24000

Meal Coupons (up to Rs 50 Per Meal is Tax Free)

12000

Relief under Section 87 of Rs 2500/-  (i.e 5% of Income)

50000

Total Income – Tax Free                                               

1201200

 

 

1) Investment in 80C for Purpose of taking full benefit of 1.5 Lakhs

Deduction under 80C is related to deduction that an individual can deduct from his gross taxable income in order to reduce his tax liability by investing in specified investment. It is applicable to individuals and HUF. An assessee can get deduction under section 80C upto a maximum of Rs.150000.  The qualifying investments and expenditure as deduction under 80C are investment in Insurance Policy, Post Office Time Deposit Account, Investment in Equity Linked Saving Scheme (Mutual Funds), Public Provident Fund, National Saving Certificate (Read Article Why to invest in National Saving Certificate ?), Tuition Fees Paid, Bank Fixed Time Deposit, Repayment of Principal of Housing Loan, Sukannya Samriddhi account, to Read more about  Deduction under section 80C of Income Tax Act - Specified investment / Expenses Click here.


 

2) Investment in National Pension Scheme up to Rs 2 Lakhs

 

Finance Minister Arun Jaitley in Budget 2015-16 introduced an additional income tax deduction of Rs. 50,000 for contribution to the New Pension Scheme (NPS) under Section 80CCD. NPS is a voluntary pension scheme, which is regulated by the Pension Fund Regulatory and Development Authority. This extra deduction of Rs. 50,000 on NPS will increase the total deduction allowed under Section 80C and 80CCD of Income Tax Act to Rs. 2 lakh. The finance minister has made withdrawals from NPS on maturity tax free upto 40% of the total corpus accumulated. Currently, none of the withdrawals were tax-free unlike other competing instruments such as PPF and EPF where the total withdrawal was tax -free. This is a major step towards making the NPS scheme more attractive and bringing it on par with the other EEE pension schemes. The Budget 2016 proposes to provide a uniform tax treatment to the recognised provident fund, national pension system and superannuation fund. 
It is proposed that 40% of the pension wealth received by an employee from the National Pension System Trust shall be exempt. 

Read Related Article National Pension Scheme Return Analysis and Plan Comparison

Read Related Article Save Tax by Additional deduction under National Pension Scheme

 

3) Home Loan Interest and House Rent Allowance (up to Rs 2.5 Lakhs or Rs 60 Thousand)

Employess gets HRA as a part of Salary. If the Employee is living in rented accommodation they can Claim HRA benefit and save on taxes. If the Employee is staying with parents in that case too they can pay rent to parents and Claim HRA benefit. Click to read Article HRA House Rent Allowance Section 10(13A) - under the Income tax act 1961

 

For employees who don't get HRA benefits, the FM raised the deduction against house rent from Rs 2,000 per month to Rs 5,000. This would result in tax savings in the range of Rs 3,708 to Rs 12,204, depending on the income slab.

 

First time home buyers to get additional deduction of Rs 50,000 on interest for loan upto Rs 35 lakh. This additional deduction has been given on interest for loan up to Rs 35 lakh, provided the house value doesn't exceed Rs 50 lakh.  For, the 2016-17 Budget proposes tax relief on interest payment on home loan if the property bought, or under construction, is completed within 5 years from the end of the financial year in which the loan was availed instead of the current 3 years. Assuming a loan of Rs 35 lakh to be paid over 20 years, the annual deduction comes to around Rs 2.5 lakh, including the Rs 2 lakh currently available. At 9%, the interest outgo in the first year would be Rs 3.12 lakh. So, the buyer will save Rs 75,000 if he is in the 30% tax-bracket

 

4) Tax Free Medical Allowance and Transport Allowance up to Rs 40000

Medical reimbursement and Transport Reimbursement can be claimed by the employee and it will be taken care in form 16 itself. For Medical Bills Employee needs to submit proof of expenditure incurred.

 

5) Medical insurance for Self, Parents and Dependents up to Rs 50000

Payment of premium on life insurance policy and health insurance policy not only gives insurance cover to a taxpayer but also offers certain tax benefits. Medical insurance premium paid by assessee, being individual/HUF by any mode other than cash. Sum paid by assessee, being individual on account of preventive health check-up. Medical expenditure incurred by assessee, being individual/HUF on the health of a very senior citizen person provided that no amount has been paid to effect or to keep in force an insurance on the health of such person. Read More about Income Tax Benefit for taking Life Insurance Policy 80C, Health Insurance 80D, and Expenditure on Medical Treatment 80DD

 

6) Leave Travel Allowance Up to Rs 25000

An LTA is the remuneration paid by an employer for Employee’s travel in the country, when he is on leave with the family or alone. Amount from LTA is tax free. Section 10(5) of the Income-Tax Act, 1961, which provides for the exemption and outlines the conditions subject to which LTA is exempt. Read More about How to Claim exemption in Leave travel allowance section 10(5) under the Income tax act 1961

 

7) Reimbursement of Expenses for Mobile, Travel, newspaper as actuals

Many employers provide reimbursement of Travel Expenses, Mobile and Phone Bill and for News Paper. Employee has to submit proof of expenditure.

 

8) Meal Coupons up to Rs 10000

Is Food Coupon like Sodexo coupons which are very famous given by employers to employee. Most of time employers and employee are not aware of taxability of food coupon and assume they are exempted. Read more of Food Coupon Meal Vouchers Income Tax Benefit under Salary Income

 

 

 

9) Relief under Section 87A

The rebate can be claimed if you satisfy both these conditions:

You are a RESIDENT INDIVIDUAL.

Your Total Income Less Deductions (under Section 80) is equal to or less than Rs 3,50,00

 

If both the above conditions are satisfied, rebate of Rs 2,500 will be available under Section 87A. The rebate is limited to Rs 2,500. Which means if the total tax payable is lower than Rs 2,500, such lower amount of tax will be the rebate under section 87A. 

For any query you can write to Chirag@cachauhan.in . Before making any decisions do consult your Professional / tax advisor.  Author does not take any responsibility for misrepresentation or interpretation of act or rules. Neither the author nor the firm accepts any liability neither for the loss or damage of any kind arising out of information in this document nor for any action taken in reliance there on.

 

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