When you look at your pay stub, you can see exactly how much money you make each month (the break-up of your salary). It’s all there in your letter of intent. You may use this data to figure out how much income tax you owe and how much money you have invested.
The ‘Basic’ is the first component you’ll see. As the name implies, this is the money you get to keep yourself going. Tax deductions do not apply to the ‘Basic’ component.
For tax purposes, let’s have a look at how your monthly payment is broken into (components).
- Allowance for Renting a Home (HRA)
You may claim HRA if you live in a rental flat or home that isn’t near to your workplace. To claim this deduction, you must be residing in a rental property and have a legal copy of the lease agreement from the landlord (notary or registered). HRA is exempt from the following:
What you got as an HRA from your company
You pay the rent, less than 10% of your earnings (including allowances) or 50% of your basic salary (for a metro), or 40% of your basic salary (for non-metro). If your landlord’s rent is more than Rs. 1 lakh, you’ll need to provide his or her PAN number.
- Allowance for Abroad Travel (LTA)
Domestic vacation costs are eligible for reimbursement under this section. Travel tickets for yourself and your family are included in this. If your spouse and two children are traveling with you, you are not taxed on their travel expenditures. If your parents, brother, and sister are completely reliant on you, you can take care of them.
- Gratuity income
When a person retires, he or she receives a gratuity. Also offered in the event of an emergency, incapacity, or dismissal. Beneficiaries of the pension (spouse, children, and parents) are entitled to it in the event of the employee’s death. The income tax exemption for gratuity under Section 10 (10) (iii) of the Income Tax Act, 1961 has been increased to Rs 20 lakhs by the Ministry of Finance.
- Vouchers for Meals and Groceries
Requesting meal vouchers as a perk from your employer is one option. For the first 2600 rupees of your monthly salary, you are exempt from paying income tax on these.
- Deduction following the rules of the game
Instead of compensation for medical expenses and travel expenses, taxpayers may take a deduction of Rs. 50,000 as a standard deduction. The Rs. 50,000 standard deduction may be claimed by salaried or pensioners without submitting any receipts or supporting documentation. You’re free to claim it right now. One can also invest in the stock market as one can learn from the stock market news in the Hindi language.
- Expenses for Telephone and Internet
Reimbursement for these essential costs is included in your monthly compensation. All of these costs may be written off by your business (the company does not recharge or pay your bills). Telephone expenditures may either be reimbursed or tax-deductible.
- Plan of Self-Directed Retirement
Non-taxed benefits are available if you want to retire on your terms (upper limit of Rs. 5 lakhs). Please take note that this only applies to those who work for the federal or state government or a government-established entity. When the retirement money can invest in the stock market they can learn from the latest stock market news.
- Insurance for medical expenses
Section 80D of the Income Tax Act, 1961, provides a tax deduction for medical insurance policies. Note: The allowance for medical insurance of one’s self, spouse, and dependent children is Rs. 25,000, whereas the allowance for parents over 60 years of age is Rs. 30,000. Also, Rs. 5,000 may be used to cover the expense of preventative health exams for you, your spouse, your children, or your parents, if you so want.
- Loans for a house
Section 24 of the Income Tax Act allows you to deduct up to Rs 2,00,000 of interest on a house loan per financial year. The property must be purchased, built, repaired, renewed, or rebuilt with the help of the loan. In addition, you may deduct up to Rs 1.5 lakhs in tax from the payments of the principal under section 80C.
- Loans for Education
You may be able to deduct the interest you pay on your education from your taxes. You must pay this interest out of your taxable income for the year. A qualified financial institution or charity organization must provide the loan. Individual taxpayers, as well as any of their family members, are eligible to apply for an education loan. When we say “relatives,” we’re referring to the person’s spouse and children, or the student over whom the person has legal custody.
- Incorporated Funds
A tax deduction is available for contributions made to an ELSS equity-linked savings plan. Section 80C allows you to deduct up to Rs 1.5 lakhs from your taxable income. More than 65 percent of its assets are invested in stocks, with the remaining 35 percent in debt instruments, according to the ELSS tax-saving mutual fund.