5 Replies to “How should I save income tax on my salary?”

  1. Salary Restructuring is a lesser known domain of tax planning. You can structure or restructure your salary so as to save the tax outgo by including exempt allowances and reimbursements. Instead of going for a high basic salary you can take reimbursements and allowances which are exempt from tax.
    But note that your EPF, Gratuity and Superannuation are all a percentage of your Basic, so by reducing your Basic to allow for higher allowances and reimbursements, you will also be reducing your EPF, Gratuity and Superannuation. And note that EPF is exempt from tax, gratuity is exempt from tax up to Rs. 10 lakhs in your lifetime, and the commuted pension portion of Superannuation is non taxable.

  2. Invest in PPF/EPF account and take life/medical insurance policy

    and you’ll get rebate under Section 80C and 80D of the Income Tax Act.

  3. You can utilise the benefits under section 80c like investing in NSCs, Infrastructure Bonds, FDs of tenure more than 5 years, insurance olicies from LIC or any other private insurer like Bajaj Allianz and ICICI Prudential and equity linked saving schemes like SBI Magnum Tax Gain and Birla Sunlife Tax Relief 96. Lal, I suggest you visit http://www.viewpoint.fintotal.com/article.php?id=402 on more ways to save tax.

  4. If your employer allows you the flexibility to design your salary package, then opt for allowances and exemptions that are tax free. It is essential that you choose these limits upto the actual extent of actual expenses you will incur under the categories. Balance that with the need to have a higher basic, as your EPF and retiral benefits like gratuity and superannuation are fixed as a percentaqge of your basic.
    If you want, you can use a detailed free tax calculator available at http://www.imygoals.com/pdf/taxCurrent.php to get details on tax saving possibilities.

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