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How to maximize your monthly income?
Posted on: 02/Feb/2018 4:56:46 PM
Here is a guide that will help you maximize your monthly income. Income from an employer is termed as salary. This includes value of perks and allowances. Deductions available: Standard deduction like HRA, LTA etc
You can gain or lose from the real estate you own. Deductions available: Standard deduction, which is 30% of income post house tax, interest paid on home loan and losses from previous years.
You may also have net profit from any business or profession. Deductions available: Expenditure for business or profession, and losses from previous years` business or profession, and losses from previous years.
Profit or loss from sale of a capital asset is called Capital Gains. The asset may include property, shares, jewellery or mutual fund units. Deductions available: Depends on asset, holding term, indexation, losses carried forward and investment in specified options
If you have income other than the above four, deductions available are: Dividends are tax free, if not in excess of 10 lakh. So are gifts from specified relatives or received on certain occasions. Interest from NRE accounts, PPF account etc.
Things to remember:
Income from investments made in the name of your minor child or spouse could be added to your taxable income resulting in higher outgo.
If you haven`t let out your second home, notional rent is added to your taxable income.
This is the most common CTC component. Those staying in rented accommodation can avail of an exemption against the HRA received and only the balance will be taxable.
Tax implications depend on:
1. Type of accommodation - hotel, serviced apartment, leased accommodation
2. Whether the property is owned by the employer or leased by the employer for you
3. Whether the accommodation is furnished or not
4. Your salary level
5. The city/town where you have been provided accommodation
If your accommodation is paid for by your employer, depending on a combination of factors, you may check with a tax adviser which is more beneficial to you - claiming HRA or living in your employer`s flat.
LTC exemption is allowed in respect of two domestic journeys taken in a block of four years. The new block commenced on January 1, 2018. Restrictions apply. Eg. If you are travelling by air, it is limited to economy class airfare for the shortest route to your destination. No exemption is available for hotel and local conveyance expenses.
If you haven`t availed of your entitled leave, you may have an option to get it encashed - your employer may permit this only on retirement or resignation. The maximum aggregate exemption available in a lifetime is 3 lakh.
Reimbursements of your telephone expenses, including data charges, are exempt. There is no cap on the maximum amount that can be claimed for phone expenses. However, your employer may put an internal cap. In addition, if you get meal vouchers, such as Sodexo coupons, these are exempt from tax to the extent of 50 per meal. You could also claim children`s education allowance (restricted to two children) - albeit a small tax break of 100 per child and an additional 300 for hostel expenses, if any. Exemption on reimbursement of medical expenses up to 15,000 is no longer available.
The perquisite value of a car benefit provided by an employer depends on who owns the car, the capacity of the engine, whether you or the employer pays for maintenance, running cost (including fuel), driver, and if the use is official or personal. Some employers also offer car on lease, which could bring down your tax.
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