How to pay Zero tax on Income up to 10 Lacs in FY 2018-19 and Zero tax up to 12 Lacs in next FY 2019-20 onwards?

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After all, a rupee saved is a rupee earned.

First, Have a look at all possible tax deductions available for you. I have listed below most of the deductions applicable to all individuals here. You may consider whichever is applicable to you.

CategoryPossible deductionsRemarks
Tax PayableZeroWith 12 Lacs income from FY 2019 -20 onwards
Check list for possible deductions, ensure you check this before filing return.
Deduction under Sec 80C1,50,000/-Complete possible options under 80C is listed below
Additional exemption for NPS contribution 80CCD 1b50,000/-National Pension Scheme
House rent payment1,08,000/-Considered at 9,000/month, as it has a check on HRA and basic of your salary.
Exemption on transportation and Medical allowance40,000/-This can be availed without any bills. standard deduction as per Budget 2019 is 50,000/- effective from FY2019-20.
Interest on House loan exemption under section 24B2,00,000/-
Additional exemption on interest paid on home loan for first time home buyers-80EE- Rs. 50,000/--Not considered here as it may not be applicable for most of the people.
Section 80G- Donations-There are several donations which qualifies for 100% deduction & some with 50%, you may explore them as per your preference.
Leave Travel allowance (LTA)25,000/-Enjoy your vacation once in a year and take tax exemption
Health Insurance policy for family( Self, Spouse, Kids, Parents)50,000/-This insurance is a must have for all for any un fortunate diseases. Don’t forget to include cancer wording.
Fuel expenses reimbursements exempted upto 1Lac1,00,000/-This may be applicable based on your cadre and position in the company.
Mobile/telephone/Data card reimbursement Exemption33,000/-Many companies will give up to Rs. 50,000/- I have considered 33,000/- You may consider as per your eligibility.
News paper12,000/-This entirely depends on your company, many MNCs are not giving this as separate component, but better to check!
Meals/Lunch coupons12,000/-Again based on company, 1k/month is just minor amount considered here, many companies are giving lunch coupons worth 5000/- per month. Have a check!
Total of above deductions7,80,000/-
Current FY 2018-19- Considering Income as Rs. 10Lacs
Income from salary10,00,000/-
Taxable income2,20,000/-
Basic exemption2,50,000/-
Balance taxableZero
Tax Payable ZeroWith 10 Lacs income in FY 2018 -19
Applicable from FY 2019-20-on wards Considering Income as Rs. 12 Lacs & Budget 2019 announcements,
Total Deductions as per mentioned above7,80,000/-
Increase in Standard deduction in Budget 201910,000/-Changed from 40,000/- to 50,000/-in recent Budget 2019
Total Deductions available for FY 2019-207,90,000/-
Income from Salary12,00,000/-
Taxable Income4,10,000/-As per Budget 2019, If your taxable income is within 5Lacs, you will be eligible for rebate of up to Rs.12,500 under 87A
Basic Exemption2,50,000/-
Balance taxable1,60,000/-
Tax on above(at 5%)8,000/-
Rebate under 87A8,000/-Maximum is 12,500/-, so even if you could not take deductions in few of above as per your salary structure, you can still try this.

  • Possible options to save tax under 80C, up to Rs. 1,50,000/-

    • Tax saving mutual funds schemes, ELSS
    • Term insurance premium
      • Term insurance is the best one for protecting your family, all other insurances are will not give you a huge sum as they need in case of any unfortunate event.
      • Term insurance with ELSS combination will work best in the long run.

    • savings in Public provident fund
    • savings in Employees Provident Fund (EPF)
    • savings in Bank Fixed deposit/Post office FDs for 5 years
    • savings in NSC deposits for 5 years
    • Senior Citizen Saving schemes in bank/Post office
    • Home Loan principal amount repayment
    • Children School tuition fees payment.
    • NPS-New Pension Scheme / National Pension System
    • Life Insurance plans premiums
    • Sukanya Samriddhi Yojana for girl child -SSY
  • Exemption for NPS contribution 80CCD 1b

    • You can make an investment in NPS scheme for Rs. 50,000/- you can claim deduction under 80CCD, this is over and above initial 1.5Lacs as in 80C.
  • House rent payment

    • You can claim rent paid to your accommodation, and this is linked to HRA, Basic salary, and your total salary
    • In case if you are not having HRA component in your salary, still you can claim a deduction with Minimum of following
      • 5000/ month
      • Rent paid minus 10% of the salary
      • 25% of your salary
  • Interest on House loan exemption under section 24B

    • Owning a house is a dream of many people, while you enjoy achieving that dream with a home loan, you can claim a deduction of up to 2 Lac on account of interest payment to a home loan.
    • This house can be self-occupied or rented to others.
    • Yes, you can avail this 2Lac benefit, even if you are staying in the rented home and takes credit of HRA for a rented house, this is applicable only when you are staying in a different location due to employment.
  • Additional exemption on interest paid on the home loan for first time home buyers-80EE

    • You can avail additional 50,000/- deduction if you are a first time home buyer and meet below conditions
      • Value of home must be less than 50Lac
      • The home loan must be less than 35Lac
      • The loan must be taken between April 2016 to Mar 2017
      • As this comes with many conditions, which is difficult to meet, I have not considered this deduction of Rs.50,000/- in the above calculations. If you meet this criterion, go ahead and claim deduction!
  • Leave Travel allowance ( LTA)

    • You can enjoy your vacation with family once in a year and take tax advantage, you can ask your employer about the rules /limit of your eligibility
    • You can also club 2 years LTA and take vacation travel once in two years take advantage of full limit for both years.
    • This covers only Travel costs. Accommodation /Stay/Food expenses will not be considered.
  • Health Insurance policy for family (Self, Spouse, Kids, Parents)

    • You can take Medical Health insurance premium to your family below is the summary
      • Self, Spouse, kids: Rs. 25,000/Yr and parents: Rs. 25,000/Yr so total Rs. 50,000/-
      • If your parents are above 60 yrs age, the limit for parents is increased to 50,000rs, in this case, you can claim total Rs.75,000/- deduction.
      • Health insurance is a must nowadays, considering the high costs of medical treatments
  • Various tax effective reimbursements you must consider

    • Fuel expenses reimbursements
    • Mobile/telephone/Data card reimbursement Exemption
    • Newspaper/Lunch coupons Meals etc.
  • Section 87A rebate :

 

Hope this helps in taking your tax decisions effectively, please write to me if you have any clarifications.

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4 Comments

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  1. Summarized well. this gave me insight of all options for deductions.
    Thanks.

    1. Welcome Ramesh.

  2. Very crisp & well explained…

    1. Thanks Purushothaman.

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