When it comes to paying taxes on their earnings, salaried individuals often look for ways to save tax. However, instead of resorting to shortcuts, it is essential to plan wisely. By making proper use of the allowances included in your salary, you can legally save a significant amount of tax.
Here are some key allowances that, when included in your salary package, can help reduce your income tax burden:
1. House Rent Allowance (HRA)
Many companies provide House Rent Allowance (HRA) to their employees. If this is not part of your salary, you can request its inclusion. It can constitute 40-50% of your basic salary and plays a significant role in saving tax.
2. Transport/Conveyance Allowance
This allowance covers commuting expenses between home and office. If it’s not already part of your package, request its inclusion to save tax on such expenses.
3. Medical Allowance
Companies often provide a medical allowance to cover employees’ and their families’ medical expenses. This allowance can be an essential part of your salary and aids in tax savings.
4. Car Maintenance Allowance
If you use your personal vehicle frequently, this allowance can cover maintenance, fuel, and driver costs. It is non-taxable and helps reduce your tax burden.
5. Leave Travel Allowance (LTA)
This allowance is given for travel expenses. Employees can claim reimbursement under LTA twice in four years, making it a tax-saving benefit.
6. Mobile and Internet Reimbursement
If you use your mobile or internet for office work, this allowance covers the bills without any tax deduction, saving you money.
7. Uniform Allowance
Some companies provide a uniform allowance for employees. If your company offers this, ensure its inclusion in your salary, as it is tax-free.
8. Food Vouchers or Meal Allowance
Many companies offer food vouchers or meal allowances, which can be used for dining expenses. This is a tax-free allowance that saves you money.
9. Education and Hostel Allowance
If you have children, this allowance can be used for their education and hostel expenses. It is also exempt from tax.
10. Books and Magazine Allowance
If your job involves reading books, magazines, or newspapers, this allowance can be included in your salary. It is also tax-free.
Plan Your Salary Smartly
Whenever you join a job, review your salary details carefully. If these allowances are not included, discuss with HR and request their addition to your package. Doing so will not only help you save on taxes but also make your salary usage more efficient.