Bifurcation of Your Salary/CTC : People who are getting salary of around 20 Lakh per annum, often asking the Chartered Accountants and Tax Consultants about-How to Earn Tax Free Salary of 20 Lakh ? With proper tax planning you can earn salary of around Rs.20 lakhs and still may not be required to pay any income tax.
Yes you have read it right. You can have a salary upto Rs.20,00,000 per annum and still you will not be required to pay any Income Tax.
How this is possible-we will understand in this Blog.
There are several Deductions and Exemptions are available under the Income Tax Act. These Deductions and Exemptions will reduce your Total Salary Income. Apart from these Deductions and Exemptions, there are several other Benefits and Perquisites which can be part of your salary without attracting any income tax on the same.
We will now take an example of a salaries person who is getting total Salary of Rs.20,00,000 during the current financial year 2022-23.
We will bifurcate his total CTC of Rs.20 Lakhs in the following manner
Out of the total salary of Rs.20 Lakh, the following deductions/exemptions can be availed under the Income Tax Act :
Deduction under Section 80C 1,50,000
Deduction under section 80CCD(IB) 50,000
Mediclaim for Self & Parents 50,000
Standard Deduction 50,000
HRA 6,00,000
Interest on Home Loan 2,00,000
Gratuity 50,000
EPF 1,25,000
NPS 1,00,000
TOTAL 13,75,000
We can see that if we consider all these deductions and exemptions from Rs.20,00,000,the balance taxable salary shall be reduced to just 6,25,000
Out of the above amount of Rs.6,25,000/-, we can claim following tax free benefits/allowances :
Car Maintenance 25,000
Meal Coupons 25,000
Reimbursement of Mobile/Internet
Bill/Uniform/Children Education/
Hostel/Newspaper & Journal allowance
& LTC etc. 1,25,000
Total Benefits 1,75,000
We can see that if these benefits of Rs.1,75,000 are further deducted from the balance taxable salary of Rs.6,25,000, the balance taxable salary will be only Rs.4,50,000
There will be no Income Tax liability on the remaining salary of Rs.4,50,000 in view of the Tax Rebate available under 87A of the Income Tax Act.
Practically, it may not be possible for every person to get the above CTC structure. If you are able to follow the above Salary/CTC structure then you will not pay any Income Tax Act on salary of Rs.20 Lakh. However, if you are not able to follow the above salary/CTC structure, then also you will be able to save a huge amount of Income Tax in the legally permissible manner.
Also Read : Tax Free Income of Rs.20 Lakhs for Professionals
Tax Free Income of 20 Lakhs for Professionals – MoneyInsight
