Income Tax: Exciting Announcement! As long as you follow the guidelines, you won't be required to pay any taxes on profits up to Rs 12 lakh

Income Tax: Exciting Announcement! As long as you follow the guidelines, you won't be required to pay any taxes on profits up to Rs 12 lakh

Income Tax: Exciting Announcement! As long as you follow the guidelines, you won't be required to pay any taxes on profits up to Rs 12 lakh

Income tax regulations provide that taxes may be avoided if tax deductions and exemptions are used appropriately. To do this, however, you will need to maintain a low tax scope in your wage structure.

The year 2019 has begun. It's time to create a fresh budget. However, one should attempt to conserve taxes for the current fiscal year before doing that. You may save taxes if you prepare. I assure you that if the planning is done correctly, there won't be any taxes applied to your pay. That implies no taxes.

must obtain reimbursement

Income tax regulations provide that taxes may be avoided if tax deductions and exemptions are used appropriately. To do this, however, you will need to maintain a low tax scope in your wage structure. In addition, there are additional advantages that come with reimbursement.

How can one get 0% tax?

The issue at hand is that maintaining a balance between savings and investments is necessary to prevent salary taxes of any type. There won't be any tax on your pay if you make full use of investment options and reimbursement for your Rs 12 lakh income. The whole pay will be paid to you tax-free.

What components of the pay structure need to remain?

You still have the power to alter the compensation system. Additionally, you may ask HR at the firm for this. The amount of compensation is limited. However, it could have many gadgets in it. Reimbursement may also be used to conveyance, LTA, amusement, internet bills, gas bills, and vouchers for food or entertainment. All of these will assist to reduce taxes. In addition, HRA offers the possibility of tax savings.

This is how HRA benefits you.

When claiming HRA, three figures are involved. The least expensive of these three will be free from taxes. The company's pay plan includes HRA based on both metro and non-metropolitan areas. Up to 50% of the basic wage in a metro area and 40% of the basic salary in a non-metro area are exempt from paying HRA. HRA is defined as the remaining amount after the basic pay (ten percent) is subtracted from the total rent.

In what way will your HRA be chosen?

In Metro City, the ticket is Rs 20,000. i.e., twenty percent of your monthly income. Half of CTC will be the base salary. Your primary in this instance is Rs 6 lakh. You would get HRA of around Rs 2.40 lakh per year if you receive HRA from the firm equal to approximately 40% of your base pay. However, if you reside in a metropolis, you are eligible to get up to 50% of HRA, or Rs 3 lakh. The yearly rent at the rate of Rs 20,000 was Rs 2.40 lakh. From this, the total HRA was Rs 1.80 lakh after subtracting 10% of the base pay, or Rs 60 thousand. Now, of the three values mentioned above, Rs 1.80 lakh is the lowest. You are eligible to get Rs 1.80 lakh per year in this case.

Leave Travel Allowance, or LTA

The LTA benefit is refundable twice every four years. It also covers the cost of the trip itinerary. This equates to 10% of your base pay. A base pay of Rs 6 lakh would entitle the employee to LTA of Rs 60 thousand. An yearly average shows that a tax exemption of Rs 30,000 is available.

How may I get the refund benefit?

Conveyance Allowance: Reimbursement for individuals in the Rs 12 lakh pay band typically ranges from Rs 1 to Rs 1.50 lakh. In other words, the Rs 1.50 lakh conveyance allowance will not be subject to taxes at all.

2. Broadband bill: The broadband bill may potentially qualify for a tax exemption. Add this to the amount that gets reimbursed. A monthly stipend of Rs. 700–1000 is provided for this. Assuming you get Rs 1000 each month under this arrangement, your yearly non-taxable pay comes to Rs 12000.

3. Entertainment Allowance: The meal bill must be shown in order to receive entertainment reimbursement. The maximum amount of tax that may be avoided for those earning up to Rs 12 lakh per month is Rs 2000, or Rs 24 thousand.

4. Uniform, books, or gas bills: Various businesses provide compensation under the guise of books, gas, or uniform invoices. You may also take up to Rs. 1000–2000 in this category. Reimbursement of Rs 1,000 per month would increase the amount that is non-taxable to Rs 12,000 per year.

You will undoubtedly get an income tax exemption.

The Income Tax Act provides a number of deductions that may be used to lower the taxable pay.

1. Basic income exemption: Salary up to Rs 2.5 lakh is exempt from income tax under current regulations. That is to say, you would not be excluded from paying taxes on your whole income up to Rs 2.5 lakh. But in the end, it's calculated.

2. Standard Deduction: A standard deduction of Rs 50,000 would be offered initially. Meaning that you should deduct Rs 50,000 from your pay, whatever it may be.

3. Section 80C: This exempts up to Rs 1.50 lakh in investments from taxes. This covers financial instruments like as house loan principal, LIC, EPF, PPF, Sukanya Samriddhi Yojana, NPS, and child's tuition costs. You are able to use it fully.You may claim a deduction of Rs 1.50 lakh by doing this.

3. Section 80CCD(1B): This allows for an extra Rs 50,000 to be invested in NPS.

4. Section 80D: By purchasing health insurance for yourself, you may save up to Rs 25,000 in taxes. In addition, you are eligible for tax exemptions on parent health insurance up to Rs 25,000. This might result in a total deduction of up to Rs 50,000. The upper limit of the senior citizen deduction is Rs 50,000 if each parent is older than 65. You are eligible to save up to Rs 75,000 in taxes in this scenario. You may now save tax on up to Rs 50,000 in 80D deductions.

You now comprehend how taxable and non-taxable are calculated in full.

First HRA: This would provide a tax exemption of up to Rs 1.80 lakh.

Second Reimbursement: The total reimbursement of Rs 1.98 lakh would be obtained by adding all of the reimbursements together.

Third deduction: A total of Rs 3 lakh is allowed for deduction.

There would be a tax deduction of Rs 30,000 for the Fourth Leave Travel Allowance (LTA). Of your entire pay, Rs 7.08 lakh will be tax-free.

Income tax will now be zero.

The whole remuneration for a year is Rs 12 lakh. Of this, Rs 7.08 lakh will be tax-free. Currently, Rs 4.92 lakh is the taxable salary. There will now be an additional income tax rule. If your taxable salary is less than Rs 5 lakh, section 87A will exempt you. The tax rate on salaries between Rs 2.5 and Rs 5 lakh is 5%; however, a refund of Rs 12,500 will be granted on Rs 2.5 lakh if the total taxable pay is less than Rs 5 lakh. The remaining Rs 2.50 lakh will thereafter be subject to the basic exemption limit. Your full wage will be tax-free in this manner. Your total tax becomes zero (0) in this method.