TAX SAVING TECHNIQUES FOR SALARIED CLASS

 

We have a seen a number of salaried class people being bamboozled during the time of declaration of savings.

 This problem is faced as there is lack of proper knowledge within the organization as the companies are busy planning the company’s transactions over that of employees.

However, there are certain companies which conduct a seminar to all the employees every year helping them to understand the nuances in the area of taxation.

We have a feeling that the finance and accounts department in every organization must have a person who has the basic knowledge at least on the methods in which tax can be saved for employees.

We hope this article will be useful not only to the employees filing up their tax saving declarations but also to the people working the accounts and finance departments.

1.       CONVEYANCE

800 per month are allowed as deduction. Many companies have this standard deduction. In case you are not using it please first claim it.

2.       EDUCATION AND HOSTEL ALLOWANCE

100 per month per child (maximum of 2 children) is allowed as deduction for education & 300 per month per child (maximum of 2 children) is allowed as deduction if they are staying in a hostel. 8 of 10 cases we have found that this deduction has not been used.

3.       HOUSE RENTAL ALLOWANCE (HRA)

Dependent on the following factors: a)      Place of employment b)      Salary received c)       Rent Paid d)      HRA Received Calculation of HRA is as follows Least of: a)      Actual HRA received b)      50% of the salary (metros: Delhi, Kolkatta, Chennai, Mumbai) 40% of the salary (others) c)       Rent paid in excess of 10% of salary SALARY = BASIC PAY + DEARNESS ALLOWANCE                 Essentials for claiming the HRA Deduction a)      HRA should be a part of the salary b)      Rent must be paid by the employee ·         Rent receipts are required ·         If you are paying any amount to your parents and staying in their house not to worry you can show that as rent as well. (but consider taking an advice before taking this step) ·         If no rent is paid then no deduction.

Did you know?

Rent receipts need not be collected from the employees if the value of rent paid is less than Rs.3000/- However, if there is an assessment then rent receipts needs to be produced before the AO by the employee

4.       FOOD COUPONS

o   Food coupons up to Rs.60000 p.a. is allowed as deduction. o   Companies like Sodexho are providing these coupons. o   You can buy your daily groceries by using these coupons

5.       LEAVE TRAVEL ALLOWANCE

Within a block of 4 years one can make use of this twice allowance. If in the previous block you have not used the benefit then you have to option to carry forward the benefit to the next block. Only the travel expenditure is exempt all other expenditures are not allowed as deduction

6.       80C DEDUTIONS

·         You get deductions on certain savings and expenditure up to Rs.1,00,000/- p.a.

·         Some of the allowed payments are life insurance, tution fees (college and school fees, PF, PPF, ELSS or MF’s, NSC’s and so on….)

There are many more deductions available, which we will bring out in the next edition stay tuned for that.

We would also like to say that there are quite a few transactions that could be planned in such a manner that both the company and the employee can claim benefit of. There will be certain clerical work to done if you have plan such transactions.

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