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A good way to reduce your tax liability is to revamp your salary structure and add some components.
Your income tax liability can be reduced if the following components are made use of in an efficient manner:
Medical Expenses:
The medical expenses incurred by the Assessee and family members who can be included under the allowance can amount to INR 15000 per annum of Tax exemption. This amount is also compensated by the employer. Principal Repayment of Housing Loan: Amounts leading up to a maximum of INR 1,00,000 is eligible for Tax exemption in the case of the repayment of the Principal amount toward a home loan. The interests paid are eligible to be tax exempt for a maximum amount of INR 1,50,000. If the acquired home loan is of a higher value then the principal
amount and the interest paid may prove to be higher than the allowed tax exempted amount.
Allowance given to an employee employed in the transport system such as Air, Sea, Rail or any such system:
This Tax exemption is allowed in the absence of the employee working under the mentioned transport systems receiving any compensation for his day to day expenses made during his duty that requires him to travel from one place to another. The Tax exemption is allowed for up to 70 per cent of such an amount received by the employee but is limited to an amount of INR 6000 for a month. In such a scenario, in order to gain the maximum Tax exemption, the Assessee can opt for a joint home loan with a spouse or a parent or sibling. In this case, both the joint owners of the said property can enjoy tax Tax exemption in the right proportions as per the percentage of the loan amount they hold.
Conveyance Allowance:
When an employee is paid allowance for his conveyance that he needs to undertake for his official tasks this allowance is considered as conveyance allowance. The expenses borne by the employee from his gross salary is thus allowed to be exempted from taxes.
b) An amount of INR 2400 in addition to INR 900 towards the driver deducted for the exact amount the Assessee receives from the employer if the Cubic Capacity of the car exceeds 1.6 litres.
Unfurnished accommodation:
When the employer provides unfurnished accommodation to the employee, the rate is calculated as: a) In cities where the population is more than 25 lakh, 15 per cent of the total salary. b) In cities where the population exceeds 25 lakh but is less than 25 lakh according to the 2001 Census, 10 per cent of the total salary. c) In other places, the value of the perquisite will be 7.5 per cent of the salary. When the accommodation is rented out or leased out by the employer, the rate set is the lower amount of either 15 per cent of the salary or the actual amount that is paid by the employer towards rent or lease.
Furnished accommodation:
When the employer provides furnished accommodation to the employee, the value of the perquisite as calculated by the method used for unfurnished accommodation sees an increase of: a) 10 per cent of the cost of equipments, appliances, furniture when they are owned. b) In the event of the equipments, appliances, furniture being hired, by the total amount that is payable as hire charges. c) Or as any charges that the employee may have himself reduced.