10 Beneficial Income Tax Deductions for Salaried Individuals

salaried income tax

Last updated on August 25th, 2019 at 02:50 pm

Salaried employees are offered many tax deductions on the income tax they pay for the salary that they get which includes the basic salary as well as the allowances and pensions that they get from their employer or the organization that they provide their services to.

10 Deductions that Salaried People are Subject To

Tax Saving Mutual Funds

Tax saving mutual funds has income tax deductions on them, as the name itself suggests. The ELSS – Equity Linked Savings Scheme mutual fund has tax deductions offered under the Section 80 CCD and Section 80 CCC of the Income Tax Act. Taxes can be saved by the salaried individuals who have a limited income every month.

Employee Provident Fund

The employee provident fund gives an employee an amount of money and it is considered to be a part of the salary income that they receive. An income tax deduction is available on the employee provident fund which is taxed. These exemptions are given for the employees to save more money and promote the plan. The Section 80 CCC and 80 CCD provide the income tax deduction under this.

Hostel Facilities Allowance

In case the child of a salaried individual is getting their education by staying at a hostel facility during the course of their education, then they are subject to getting a hostel facilities allowance. The allowance for the hostel facilities are linked to the allowance for the education of the child. This allowance is a part of the salary and hence is taxable. These taxes are exempted under the Income Tax Act.

Annuity or Pension Schemes

An Income Tax deduction is available on the Pension schemes or annuity schemes that an individual takes up. On pension schemes, an individual receives return on the investments that they make. The return is considered as an income that falls under the category of “income from other sources”. This income is taxable and a salaried individual is subject to getting an income tax deduction on it. The section 80 CCC and 80 CCD of the Income Tax Act provides this tax exemption.

House Loan

During the tenure of the employment of an individual in an organization, they might want to purchase a house. And this would require them to take up a loan. The employer will provide them with a loan. The house loan is provided in case the employee has to change their residence during the course of their work at the company. Now, the income tax deduction that an individual gets is on the interest of the home loan which is available under the Income Tax Act. There is an important point that you all have to keep in mind; it is that the income tax deduction will only be provided in case the house being purchased is to be occupied by the employee.

Child Education Allowance

An employee is also subject to getting an allowance for child education which will help them to educate their child and provide them with the proper tools like books and supplies. The allowance that an individual get to be able to educate their child is also considered as an income and that income is taxed. One can avail a tax exemption on the child education allowance under the Income Tax Act. The allowance will only be provided for 2 children of the individual during the tenure of their employment at the organization.

Tax Saving Fixed Deposits

The Income Tax Act’s Section 80 CCD and Section 80 CCC provide tax exemptions to the individuals who have put their money into fixed deposits. This is a great investment option for salaried people as they can save money by saving taxes.

Also Read: Tax Planning: Best 5 Ways to Save Tax Legally

Tax Exemption on allowance for House Rent

Employees are subject to getting an allowance for house rent so that they can have a place of stay during the duration of their job. This allowance is a part of the salary income that a salaried individual gets. So, this income is taxable. And, if an income is taxable, it might also have tax exemption on it, depending on the nature. The house rent allowance is exempted from tax which is allowed by the Income Tax Department. The house rent allowance tax deduction is available under the Section 80 GG of the Income Tax Act in India. If you are an individual staying with their parents, you can also get the house rent allowance tax deduction by paying them rent through a rent agreement; this also helps you to avail the house rent allowance.

Life Insurance Premium

A life insurance plan that an individual takes up gives out an amount of corpus to the plan holder by the payment of taxes. The premiums are to be taxed under the income tax act. But, under the Income Tax Act provides for the taxes to be deducted under the Section 80 CCC as well as 80 CCD. The premium tax exemptions really help an individual to save up money and also get return at the same time.

Allowance for Transportation

An employee gets a transportation allowance so that they can commute to and fro their workplace during the tenure of their employment at the particular organization. The allowance for transportation is also a part of the salary that an employee gets. Transportation allowance helps an individual to easily spend that money on comfortable transportation that will get them to their workplace fast and in time. This allowance is taxed and there are an income tax deduction is available on it under the Income Tax Act. In this case, the employees need not provide the receipts as they have to commute.

Salaried employees have a lot of income tax deductions that they can avail under the Sections of the Income Tax Act. Income taxes have to be filed properly and within the due date so that the deductions, exemptions and returns can be processed.

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