Income Tax Saving Guidelines for Employee's

Summary about this page
Taxes are difficult to avoid, but there are many strategies way to bring down employee tax liability. This article provides an in-depth glance about recent changes put forward by the Government of India via 'Budget 2021' along with various tax-saving elements made available under the Income-tax act with, how, and when it should be provided by employee to his employer to save tax deduction from his monthly salary.
INCOME TAX is the tax paid by an individual or a Hindu Undivided Family(HUF) or any taxpayer other than Companies, on the income received. The income tax amount varies with the respective income as per the various Income tax slab. Budget 2020 had provided the option to choose between the existing income tax regime and a new tax regime. The new tax regime has slashed income tax rates with new income slabs by giving up too many tax exemptions. The New Tax Regime is benefited to newcomers who wish not to make any tax savings investments.
Under the Income Tax Act, 1961, there are various methods to save income tax by Individual or HUF or other tax payers. Some of these tax-saving methods are listed below under different Income Tax Act's;
1. u/s 10 (Payment of House rent, Leave travel amount, etc)
2. u/s 80 C (LIC, PPF, ELSS, Housing loan principal, Tuition fees, etc)
3. u/s 80 Others (Health Mediclaim, Handicap expenditure, Education Interest repayment, etc)
4. Housing loan repayment, Electric Vehicle Car loan repayment, etc.

For Employee's, what are the changes introduced by Government of India under Income Tax for financial year 2021-22?

The Budget 2021 had made not any major changes to employee income tax.
1. Income tax slab for Financial Year 2021-22

For age upto 60 yrs For FY 2020-21 For FY 2021-22*
Normal Citizen Old tax regime New tax regime
Income upto 2.5 lacs NIL NIL
Income from 2.5 lacs to 5 lacs 5% 5%
Income from 5 lacs to 7.5 lacs 20% 10%
Income from 7.5 lacs to 10 lacs 20% 15%
Income from 10 lacs to 12.5 lacs 30% 20%
Income from 12.5 lacs to 15 lacs 30% 25%
Income above 15 lacs 30% 30%
*The New tax regime will be standard for all age groups, i.e.'Normal Citizen', 'Senior Citizen' & 'Very Senior Citizen'. Basically, the lower-income limit will be 2.5 lacs for all age groups if anyone opts for the new tax regime.
The old tax regime will remain unchange for 'Senior Citizen' & 'Very Senior Citizen', following below is the Income Tax slab;
For age 60 yrs to 80 yrs For FY 2021-22
Senior Citizen Old tax regime
Income upto 3 lacs NIL
Income from 3 lacs to 5 lacs 5%
Income from 5 lacs to 10 lacs 20%
Income above 10 lacs 30%
For age above 80 yrs For FY 2021-22
Very Senior Citizen Old tax regime
Income upto 5 lacs NIL
Income from 5 lacs to 10 lacs 20%
Income above 10 lacs 30%
2. No more exemptions and deduction will be allowed if the tax payer opts for the new tax Regime

1. Section 10 exemptions like House Rent paid, LTA
2. 80C (PF, PPF, LIC, ELSS, Housing Loan Repayment, etc)
3. 80other (80D, 80DD, 80DDB, 80CCD employer contribution, etc) deductions
4. Standard deductions 50K
5. Professional Tax
6. Housing Loan Interest
7. However, section 80CCD Self contribution Rs.50k deduction can be claimed
3. Certain Employer contributions aggregated amounts to be taxed

If the sum total of employer contributions, provided by employer exceeds Rs 7.5 lakhs in the financial year, then such contributions above Rs 7.5 Lakhs will be taxable. These contributions include:
1. Employer Provident fund Contributions
2. Contribution to National Pension Scheme (NPS) under Section 80CCD(2)
3. Approved superannuation fund
To access 'Online Income Tax Calculator' with above new changes, then Click here
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Income tax saving guideline for Employees, for FY 2021-22 are as follows;

When should an employee submit tax saving declaration and actual proof to his employer?

Tax saving declaration has to be done in the beginning of a financial year, when your employer asks you to declare it. Usually this is done in April every year. Investment declaration is important for you because it can lead to higher take home salary. While joining new organisation ensure to submit investment declaration along with previous employer tax computation with new employer.
At the beginning of the financial year, you have to just make an estimate of the investments that you intend to make. You dont need to submit actual proofs until the end of the financial year(March every year). You can actually invest less or more, its up to employee choice. The investments proof submitted does not be exactly what is declared at beginning of financial year. Employee who resign should ensure to submit actual proof to his employer before processing his full and final settlement.
1. List of exemptions claimed u/s 10, HRA and LTA:

House Rent Allowance (HRA) Exemption

1. Expense incurred on rent paid for residential accommodation.
2. If rent paid amount exceed Rs.8,333/- per month or Rs. 1 lacs annually, then name and pan number of landlord is compulsory to furnish.
3. For rent payment over and above Rs. 50,000/- per month, for them mandatorily required to withhold tax. The tenant should fill a Form 26QC electronically which is a challan-cum-statement towards tax payment against which tenant needs to issue a TDS certificate (Form 16C) to the landlord as proof of taxes deducted.

The HRA amount received in monthly salary is not always fully exempt from tax. The least of the following three will be exempt from tax:
1. Actual HRA received through monthly salary.
2. Actual rent paid minus 10% of basic salary.
3. 50% of basic salary for those living in metro cities & 40% of basic salary for those living in non-metro cities.
Access online HRA Exemption calculator : Click here

1. Rent receipts with revenue stamp affixed,
2. Copy of leave and license agreement,
3. Those paying rent amount more than Rs.8,333/- pm or Rs 1 lacs annually, need to furnish a copy of their landlord's permanent account number, along with the rent receipts.
4. For rent paid over Rs.50,000/- per month, Form 26QC is mandatory to provide as tax deducting proof.

Leave Travel Allowance (LTA) Exemption

1. Amount incurred towards cost of travel on self and family.
2. Only domestic travel allowed, within India.
3. Two journey in block of four consecutive calendar years.
4. Family should includes spouse, children, parents, brothers and sisters.
5. Current LTA block is - 01st January 2018 to 31st December 2021.
6. If mode of travel is through road, then A.C. first class rail fare by shortest route or actual amount spent on travel, whichever is less is exempt from tax.

The amount of LTA exemption depends on the LTA component in your salary package or CTC. You can furnish proofs of travel within the block period and claim up to the amount prescribed in your CTC.

1. Air ticket or e-Ticket along with original boarding pass if journey is by Air travel.
2. Rail tickets or e-Ticket, if journey is by rail.
3. Original travel agent bill / original petrol bill & original toll tickets if journey is by Road.
2. List of deductions claimed u/s 80C (Maximum limit under this section will be Rs 1.5 lac)

Click on the buttons inside the tab menu:..........Last updated on 14/11/2020

3. List of deductions claimed under 80 Others (80D, 80DD, 80DDB, 80CCD, 80U, 80E, etc)

Click on the buttons inside the tab menu:..........Last updated on 14/11/2020

4. List of Interest deductions claimed under HOUSING Loan and VEHICLE Loan

Click on the buttons inside the tab menu:..........Last updated on 14/11/2020