Zero Tax – In budget 2015 only few tax benefits were given to tax payer by finance minister. It was stated by finance minister in budget speech that tax payer can enjoy tax deduction to 4.44 Lac per year. But he actually missed up commonly available deduction to tax payers. If we add up all these deductions and exemptions, tax free income to tax payer will be more than 10 Lac.
You must be wondering how it is possible to have 10 Lac rupee tax free Income in India per year, where tax slab applicable is 2.5 Lac. Let’s take a closer look at how it is actually possible to have 10 Lac Tax free Income.
Zero Tax- Tax Free Income 10 Lac
Commonly available deduction and exemptions
- The Basic threshold income that is tax free – 2.5 Lac
- Section 80 C deduction – 1.5 Lac
Section 80 C includes PF, PPF, Insurance premium, ELSS, Pension plan, FDs and NSCs. In order to get this tax benefit you need to make investment in any of the investment avenues mentioned here.
- Section 80 CCD (1B) – 0.5 Lac
This additional deduction is announced this year. According to this 0.5 Lac investment in NPS will be tax free.
- Contribution to NPS by employer Section 80 CCD (2) – 1 Lac
In order to get this benefit employer has to register and contribute to NPS. This contribution is restricted to 10% of salary (Basic + DA). Maximum limit is 1 Lac.
- Home loan Interest or HRA – 2 Lac
If you have taken home loan you can take benefit of home loan interest component for tax saving. If you have not taken home loan you can claim HRA amount for this.
- Tax Free Medical Allowance – 15,000 Rs/-
Tax free medical allowance is payable to most of salaried people. In order to avail this benefit you need to submit actual bills.
- Tax Free Transport Allowance – 19,200 Rs/-
Tax free transport allowance limit is enhanced this year.
- Medical Insurance – 20,000 Rs/-
Medical Insurance premium limit is hiked this year. If you have purchased medical insurance you can avail tax benefit.
- Medical Insurance of parents – 30,000 Rs/-
Premium paid for Medical Insurance of parents can be claimed for tax deduction. This limit was enhanced this year.
- LTA – 25,000/-
Leave Travel Allowance is given to salaried people every two year. Small amount is taken here for illustration.
If we sum up all this limit total amount will be – 8.59 Lac
Other tax free perks and Reimbursements
- Travel and Fuel Reimbursement – 1 Lac
Under this category expense incurred for official travel can be claimed. You need to submit actual bill for the same.
- Phone and Communication Expense – 24,000 Rs/-
You can claim telephone and internet expense under this category. Bill is mandatory to avail this tax benefit.
- News paper and Magazine – 14,000 Rs/-
Actual expense incurred on newspaper and magazine can be claimed under this category.
- Meal Coupons – 12,000 Rs/-
Many companies offer meal coupons to their employee. You can claim tax benefit for the same.
If we sum up all this perks and reimbursements total amount will be – 1.5 Lac
This will make total Tax free income 10.09 Lac – 8.59 Lac + 1.5 Lac = 10.09 Lac
You can calculate your tax free income from here.
Murari Agarwal
I work in a PSU. My 80C limit of Rs. 1.5 L is already exhausted in PF, LIC contribution. Can I just invest Rs. 50,000/- in NPS and claim the same deduction under 80 CCD(1)b. One interpretation is that I have to invest Rs. 50,000/- over and above of 10% of my salary in NPS to claim deduction of Rs. 50,000/- under 80 CCD(1)b irrespective of my savings in PF, LIC. Please clarify.
Raviraj Parekh
Dear Murari,
New Subsection 80 CCD(1B) was introduced recently in budget 2015. As per this new subsection additional deduction of 50,000 Rs is provided for any contribution made by individual under NPS. You invest additional amount and claim.