The only respite employees tend to have is the investment-linked deductions under Section 80C and further other deductions available under Chapter VI-A of the Income Tax Act.
It has been a long-pending call for equality by the salaried class of taxpayers that they should be given an equitable tax relief as business houses.
As per the prevailing provisions of Income Tax Act 1961, businessmen and professionals are allowed deductions for expenses incurred in course of earning their incomes like office expenses, conveyance expenses, rental expenses, food expenses etc. However, people under employment and earning salary income are taxed for their gross income, subject to certain allowances being exempt like House Rent Allowance (HRA), Transport Allowance, etc.
The only respite employees tend to have is the investment-linked deductions under Section 80C and further other deductions available under Chapter VI-A of the Income Tax Act.
However, within the ambit of prevailing tax laws, there are several tax benefits which can be accrued by making payments in a structured and more directed manner.
Below we have listed some tax benefits available to a salaried employee under the present laws:
1. Communication allowance
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Under current laws, salaried employees can use spends on mobile bills to save on tax. On an average, companies have a limit of Rs 2,500 per month and this is applicable only for postpaid connections.
2. Meal allowance
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For an employee, food and grocery spending can eat into their monthly budgets. By spending through meal vouchers or claiming these expenses as tax benefits, you can add another Rs 4,500 in tax savings.
3. Leave travel allowance (LTA)
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With LTA, employees can claim travel expenses for themselves and immediate family. Considering an industry average of close to Rs 1,00,000 in LTA every alternate year, you could knock off a huge chunk of the tax exemptions available for your salary bracket
4. House rent allowance
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If employees live in a rented house, they can claim HRA (a component within salary) to lower their taxes. Subject to certain rules, it could either be partially or wholly tax-exempt. Otherwise, this allowance is fully taxable
5. Fuel and driver's salary reimbursement
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Employees who operate their own vehicles can claim monthly fuel costs up to Rs 1, 800 for a car with an engine capacity below 1.6 litre and Rs 2,400 if the capacity is over 1.6 litre. Driver's salary is exempt up to Rs 900 per month
6. Books & periodicals
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With this claim, employees can purchase books, newspapers, periodicals and other relevant literature and get reimbursed on the bills. The actual amount is fully tax-exempt.
