How to pay zero tax on 10-50 lakh income

How to pay zero tax on 10-50 lakh income

It is critical to have a well-structured income break-up in order to ensure that an individual uses all tax exemptions and subsequently all tax deductions in order to pay no or minimal tax. Almost every taxpayer in India looks for ways to reduce their tax burden. An individual can avoid this predicament with proper tax preparation. To pay no or little tax, it’s critical to have a well-structured wage break-up that ensures an individual take advantage of all tax exemptions and deductions. Some exemptions are based on the employee’s real expenses, while others are predetermined.

Here are seven of these must-have exemptions:

(1) House Rent Allowance (HRA): If an employee staying in rented accommodation, then usually the employer provides the compensation for the rent. The whole HRA is not exempt, however the lease of the following is exempt: 

  • Actual HRA received.
  • 50% of salary in case of metro city or 40% in case of non-metro city.
  • Rent paid – 10% of salary

(2) Education Allowance: Individuals might include an education allowance in their compensation structure because it provides Rs 100 exemption per kid, with a limit of two children. The entire amount of the exemption will be Rs 2,400 per year.

(3) Hostel Allowance: A hostel allowance of Rs 300 per month per child, up to a maximum of two children, is also available. In this situation, the total exemption will be Rs 7,200.

(4) Meal Allowance: Meal coupons issued by companies to employees are tax deductible up to Rs 50 each meal for two meals per day, according to income tax rules. As a result, if an individual work for 26 days a month, then he can save Rs 31,200 in taxes.

(5) Leave Travel Allowance: Within a four-year period, an individual can avoid tax on two trips taken by himself and his family. This exemption is only available if genuine expenses for travel within India are submitted.

(6) Gift from Employer: Employers can give their employees a monetary or in-kind present of up to Rs 5,000 that is completely tax-free under the Income Tax Act.

(7) Reimbursement: If an individual incur any expenses while doing his official duties, then he may be eligible for compensation from your employer. On the filing of actual bills, all of these reimbursements can be deducted from revenue. Mobile reimbursements, books and journals, clothes, and research allowances are just a few examples.

 Example: 

Gross Salary

18,00,000

Less HRA


4,30,000

Less Education Allowance


2,400

Less Hostel Allowance

7,200

Less Meal Coupons

31,200

Less LTA

55,000 (assumed)

Less reimbursements

60,000 (assumed)

Less EPF (Employer Contribution)

1,45,668

Total Salary received from employer


10,68,532

After incorporating all the exemption, now an individual can look for the various deduction which are offered by the Income Tax Act 1961.  Some of the deduction are:

(1) Standard Deduction: In lieu of transportation allowance and medical reimbursement, a standard deduction of Rs 50,000 is allowed from the financial year 19-20 onwards. This deduction is granted regardless of the amount of money spent.

(2) Section 80C:  gives the advantage up to Rs 1.5 lakh.

(3) Section 80D: talks about the medical insurance.

(4) Section 80CCD: The deduction under the National Pension Scheme is in addition to the section 80C deduction. This section allows an individual to receive an additional Rs 50,000 benefit.

(5) Interest on Education Loan: This part does not have a maximum deduction limit. An individual can claim the whole amount of interest paid on a loan acquired for his or her own, spouses, or children’s higher education.

(6) Section 24 Interest Payment: Homeowners can take a standard deduction of 30% of their rent as well as a deduction for interest paid on their mortgages. This deduction is limited to Rs 2 lakh for a self-occupied house and unlimited for a let-out residence, meaning the entire amount of interest paid can be claimed as a deduction.

(7) Section 80G: Contributions to certain relief funds and charity organizations can be deducted under Section 80G.

To continue the above example:                 

Particulars

Amount (Rs)

Salary received from employer

10,68,532

Less Standard Deduction

50,000

Less Section 80C

1,50,000

Less Section 80CCD

50,000

Less Section 80D

50,000

Less Interest on Education loan

65,000 (assumed)

Less Interest on housing loan

2,00,000

Less Donation to Charitable Organization

4,000

Total Taxable Income

4,99,532

Tax in total Income (Rebate under Section 87A)

NIL

Leave a Comment

Recent Tweets

Recent Posts

Facing Problems?
Lets Get in Touch Now

Quick Enquiry Here