Maximizing Tax Benefits for Salaried Individuals in 2024

Consider the National Pension Scheme (NPS):

The National Pension System (NPS) is a voluntary long-term retirement savings scheme that offers tax benefits. Employees can claim deductions for contributions to their NPS account under Section 80CCD(1), up to 10% of their salary. An additional deduction of Rs. 50,000 is available under Section 80CCD(1B). Partial withdrawals for specific purposes are allowed without tax implications. Annuity income is taxed based on the individual’s income tax slab, with only the invested amount being taxable.

Maximize House Rent Allowance (HRA):

Employees residing in rented accommodations can claim a deduction on House Rent Allowance (HRA) under Section 10(13A) of the Income Tax Act. The least of the following is deductible: actual HRA received, 50% of salary (for metro cities, 40% for non-metro cities), or excess of rent paid over 10% of salary. To claim HRA deduction, submit rent receipts and a rental agreement with your employer. The rent receipts should include details such as the amount paid, duration, landlord’s name, and address.

Opt for Leave Travel Allowance (LTA):

LTA or Leave Travel Allowance is exempt from taxation under Section 10(5) of the Income Tax Act, subject to certain conditions. The exemption covers travel expenses for yourself, your spouse, children, and dependent parents or siblings within India. LTA is available in a block of four calendar years. The current block is from 2022 to 2025.

Utilize the The Employees’ Provident Fund (EPF:

The Employees’ Provident Fund (EPF) is a mandatory savings scheme for salaried individuals, primarily serving as a retirement corpus. Contributions to EPF are eligible for a deduction under Section 80C, up to a maximum limit of Rs. 1.5 lakh in a financial year. The interest earned on EPF contributions is tax-free, so the returns are not added to your taxable income. EPF withdrawals after completing 5 continuous years of service are tax-free. However, withdrawals before 5 years become taxable in the year of withdrawal.

Opt for Tax Free Meal Cards:

Under Section 17(2)(viii) of the Income Tax Act, meals provided to employees can be tax-free. A standard allowance of Rs. 50 per meal is allowed. Considering standard working days and hours, employers can provide Rs. 100 per day, amounting to Rs. 2,200 per month and Rs. 26,400 per annum.

Mobile bill Reimbursement:

Many employers reimburse the bills for work-related calls and internet usage, and these reimbursements are tax-free. This encompasses telephone expenses, including a broadband internet connection, covered by the employer. Additionally, it includes expenses related to postpaid mobile phones and broadband services you incurred. Therefore, you can claim reimbursement for these expenses under the employer’s reimbursement scheme.

Books & Periodicals: –

To enhance your skills in your chosen fields, you may need to invest in books, periodicals, newspapers, and professional journals. In such instances, these expenses are tax-exempt under the category ‘Books and Periodicals.’ However, to qualify for this exemption and avail of its benefits, you must submit evidence of the expenses incurred on books and periodicals.

Fuel Reimbursement: –

Employees can request reimbursement from their employer to cover petrol or diesel expenses for their car. However, not all employees are eligible for this reimbursement. Typically, it is provided to middle and senior management, as well as sales managers, who often engage in client-facing roles.