How to decrease tax liability by planning your income tax.

How to decrease tax liability by planning your income tax.

When it comes to paying income tax, it feels good since it is a sign of success, and it gives the taxpayer the impression that their money is being put to good use. However, when this money is utilised to entice voters by giving away free items, various forms of subsidies, and remuneration solely to meet political obligations, it pinches a lot.

However, income tax is a crucial legal regulation that we must adhere to. However, we should make every attempt, within the limits of the law, to reduce our tax liability by careful preparation. I hope that this article provides our readers with accurate information in this regard.

When tax is not deducted on a monthly basis, it is especially onerous for salaried employees, especially when most of their salaries are withdrawn for Income Tax at the end of the year.

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As a result, tax planning should begin with the beginning of the fiscal year, and we should inform our employers about our spending and investments in advance, and we should stick to our commitment by producing documentation of such expenses and investments as requested by management.

Apart from salary, if individuals have income from any other source, such as rental income, revenue from a business or profession, capital gain, or other sources of income, the following are the specifics of such income, expenses, and investments:

Part A

Incomes that are not included in total income or are exempt from income tax, with a few details:

Part B

Here are some deductions to make when calculating total income:

Part C

There are a few more deductions that might be taken into account when calculating total income:

tax

Furthermore, in Budget 2020, a new tax system u/s 115BAC was implemented, which bifurcated the income tax slab. The following are both new and old slabs:

The new tax slab system, on the other hand, does not allow for deductions or specific exemptions. Without claiming deductions or exclusions, the tax payable under both the new and old systems is as follows:

How does the SBI tax savings fixed deposit scheme help you save money on taxes?

Before deciding on the regime, the taxpayer should weigh the benefits and drawbacks of both slabs. If he has reached his investment and cost limits, it is preferable to return to the former tax bracket.

There isn’t much room for a salaried worker to save money on taxes. However, for a business owner, there are numerous deductions allowed under sections 30 to 42 of the Income Tax Act. As a result, we say the UdymeBasati Lakshmi (Lakshmi resides in the enterprise).

Disclaimer: Shankar Mishra, a Chartered Accountant with more than 20 years of expertise in the subject of Direct and Indirect Taxes, as well as Company Law, is the author of this essay. (ANI)

Employee of a private company? Here’s how Reimbursements, Gratuity, PF, HRA, LTA will be taxed in 2022

  • 05 Mar 2022
  • Income Tax
  • Comments Off on Employee of a private company? Here’s how Reimbursements, Gratuity, PF, HRA, LTA will be taxed in 2022

Private Company Employee Tax Calculation 2022: How Reimbursement, Provident Fund, Gratuity, HRA, LTA components of CTC are taxed

A person’s yearly CTC at a private firm is made up of several components. LTA, HRA, Provident Fund and Gratuity contributions, reimbursements for entertainment, telephone bills, conveyance, books and magazines, and more are among them. While CTC components may have different names depending on the organisation, the tax regulations that apply to them are the same. Understanding the tax consequences of various CTC components is critical for efficient tax planning.

Gratuity, Provident Fund, House Rent Allowance (HRA), LTA, and Reimbursements are all taxed differently.

According to experts, some aspects of a paycheck are totally taxable while others are fully exempt. Some components are excluded from paying income tax in part.

HRA Income Taxes

HRA is an important component of CTC, as it provides a tax credit to employees who live in leased housing. If the employee does not pay rent, the HRA is taxed.

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A minimum of the following items can be claimed as tax-free under Section 10(13A):
  • The amount actually received
  • 50% of pay if residing in a metropolis (e.g., Mumbai, Delhi, Chennai, and Kolkata), and 40% of salary in all other circumstances.
  • Rent that exceeds 10% of one’s wage.

Reimbursement Income Tax

Companies offer varied allowances for transportation, literature and magazines, amusement, phone and internet use, and so on.

Allowances offered to employees are tax-free if such expenses are genuinely incurred, according to Section 10(14) of the Income Tax Act.

Conveyance To the extent that expenditure is incurred, allowance is excluded.

Reimbursement for telephone/mobile and internet usage is likewise deductible under Income Tax Act Rule 3(7) (ix).

Section 10 allows you to claim reimbursement for books and magazines as an exemption (14). Reimbursement Income Tax
Companies offer varied allowances for transportation, literature and magazines, amusement, phone and internet use, and so on.

Private Company Employee Tax Calculation 2022

In the case of private employees, the entertainment allowance is totally taxable. However, if the entertainment expense is incurred for the company’s business purposes, it might be claimed as an exemption.

Employees must pay original bills of expenditures in order to claim a tax benefit on reimbursements.

Provident Fund Income Tax

Section 80C of the Income Tax Act allows for a deduction for contributions to a Provident Fund.

Income Tax on Gratuity

Gratuities obtained while working are fully taxable. If your employer is covered by the Payment of Gratuity Act, you can get a tax break on your gratuity when you retire. The following items are exempt under Section 10 (10) of the Income Tax Act:

  • The amount actually received
  • 20 lakh rupees
  • For each completed year of service or part thereof in excess of 6 months, a 15-day salary is paid based on the salary last drawn.

GSTN announces upcoming GSTR-1/IFF improvements on GST Portal

Salary is defined as basic pay plus Dearness Allowance for the purpose of calculating gratuities.

  • If the employer is not covered by the Payment of Gratuity Act, the following are the exemptions:
  • Amount actually received
  • Rs. 20,00,000 
  • A half-compensation month’s for each year of service completed. (i.e. 12 * Average Monthly Salary p.m.)

LTA Income Taxes

The following are the steps to take in order to get a tax break on your leave travel allowance.

The following requirements must be met:

  • The taxpayer is responsible for the actual journey.
  • Only domestic travel is taken into account.
  • Employees may be exempt on their own or with their family, which includes their spouse, children, dependent parents, siblings and sisters. However, more than two children born after October 1, 1998 are not eligible for the exemption.

How does the SBI tax savings fixed deposit scheme help you save money on taxes?

How does the SBI tax savings fixed deposit scheme help you save money on taxes?

When it comes to avoiding paying taxes on their hard-earned money, everyone seeks for ways to save money. There are a variety of tax-saving options available. To save money on taxes, you must enrol in a tax-saving programme and claim the advantage when completing your income tax returns. One such investing opportunity is the SBI Tax Savings Scheme of 2006.

Features, benefits, and eligibility of the SBI Tax Savings Scheme

Amount of the investment

In an SBI Tax Savings Scheme, 2006 fixed deposit plan, the minimum deposit is $1,000 or multiples thereof, with a maximum deposit of $150,000 per year.

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Duration of the SBI Tax Savings Scheme

The minimum term for an account in the SBI Tax Savings Scheme, 2006 is five years, with a maximum term of ten years.

Interest rate on the SBI Tax Savings Scheme

The SBI Tax Savings Scheme, 2006, pays interest at a similar rate to fixed deposits. SBI recently increased its term deposit interest rates. General clients will receive 5.5 percent on SBI FDs maturing between 5 and 10 years. These tariffs will take effect on February 15, 2022.

income tax saving
Withdrawal and nomination rules for the SBI Tax Savings Scheme

An SBI Tax Savings Scheme account cannot be withdrawn before five years have passed since it was opened.

With the scheme, you can also make a nomination.

Amendments to the GST Act made retroactively in the Finance Bill of 2022

Benefits of the SBI Tax Savings Scheme

Section 80C of the Income Tax Act of 1961 provides tax benefits. TDS is used in a wide range of situations. The depositor can submit Form 15G/15H to be exempt from tax deductions under the Income Tax Rules.

Eligibility for the SBI Tax Savings Scheme

Resident Indians who have an Income Tax Permanent Account Number for themselves or in the capacity of the Karta of a Hindu undivided family (PAN).

The joint account must be provided to two adults or an adult and a juvenile jointly.