How Can I Reduce My 2008-09 Tax Liability with My Current Salary Structure?

Can someone tell me the tax liability for the year 2008-09 for the following salary structure:

CTC: 750,000
Basic: 375,000 pa
HRA: 150,000 pa
Conveyance: 9,600 pa
LTA: 37,500 pa
Medical Allowance: 15,000 pa
Special Allowance: 153,540 pa
Employer's Contribution to PF: 9,360 pa
Total CTC: 750,000 pa

I want to know how much savings (and what type of savings) can be done to be exempted from TDS. I need it soon, please.

Hi!

Your tax would be approximately 7500/- per month. You can save up to 1 lakh under section 80C. In addition to that, you can show your house rent receipt and medical bills to claim exemptions on those expenses as well. If you are paying for your parents' medical insurance premium or have taken a housing loan, you can also get exemptions on those. If your company provides you with a petrol allowance and covers vehicle maintenance costs, you can submit those bills to claim exemptions on those expenses.

Chitra

Hi Samantraj,

Kindly note the below-mentioned calculation of Income Tax as per my knowledge.

SALARY HEADS MONTHLY YEARLY

BASIC 31,250 375,000

HRA 12,500 150,000

CON 800 9,600

LTA 3,125 37,500

MED. ALL 1,250 15,000

SPE. ALL 12,795 153,540

PF 780 9,360

CTC 62,500 750,000

CALCULATION DETAILS

TOTAL EARNINGS 60,940 731,280

EXEMPTION - HRA 12,500 150,000

EXEMPTION - CON 800 9,600

TAXABLE SALARY 47,640 571,680

SAVINGS 8,333 100,000

TAXABLE SALARY 39,306 471,680

INCOME TAX 4,234 50,816

Apart from the above, I am trying to attach a tax calculator, but I am unable to attach it. Please provide me with your email ID so that I can send you the tax calculator.

Hope this information helps you.

Regards,

Prem Singh Rawat

Hi Prem,

Thank you for the breakup, but could you please tell me how you arrived at the figure of 60940 for total earnings per month? Everything else seems to be in order.

Thank you.

Hello Prem,

A small clarification is needed. I noticed from your calculation that you deducted the PF contribution of 780 per month twice from the monthly salary. Why did you do that?

Explanations are invited from all.

Hi Samantraj,

I believe PF is divided into two parts (Employee's + Employer's Part). You have mentioned Rs. 9360 PA as the Employer part of PF. When calculating the Net Salary, both the Employee's and Employer's parts are deducted from the CTC.

Total Earnings = Basic Pay + HRA + Conv + LTA + Medical + Special Allowances - Employee's PF - Employer's PF.

I hope both of your queries are resolved now. I am attaching the tax calculator for your reference.

Regards,
Prem Singh Rawat
The Department of Human Resources

As per my knowledge, employee PF is deducted Rs. 780 per month, and from the employer's side, it is Rs. 885 per month.

Hi Prem,

How did you arrive at this calculation for INCOME TAX 4234 50816?

Hello,

I have a point to raise here. As I was going through the post, I found out that the HRA was not 50% of the basic!
In a metro city, HRA should always be 50% of the basic, while it should always be 40% of the basic in the case of a non-metro city.

Thanks and regards,
Ayona

With the cap for investments pegged at 1 lakh, we are left with no chance to minimize our tax liability.

Hi!

Apart from the 1 lac in 80 c, if you are paying your and your parents' medical insurance premium, education loan interest, and any donations made, all of those would come under Chapter 4A. Any housing loan taken would fall under others. You can also get exemptions on your medical bills, LTA, house rent paid, children's education, and vehicle maintenance.

Chitra

As per my knowledge, employee PF is deducted Rs. 780 per month, and from the employer's side, it is Rs. 885 per month.

Hi Prem, how did you bring this calculation for INCOME TAX 4234 50816? INCOME TAX

Hi Saloni, for PF contribution, the eligibility is salary < 6500. Some companies show contribution on a maximum of Rs. 6500 (which comes out to Rs. 780). However, the PF act says that even if the salary cap is Rs. 6500 for eligibility, once someone is covered under PF, they will continue to be covered in case of an increased salary.

In order to create an easy structure, some companies calculate on 12% of the salary (flat). Hence, though the Rs. 780 calculation is not wrong, the calculation of a higher amount is also correct. Hope it's clear.

Regards,

Hi Samant,

If you can show your house rent for more than 1.9 LPA and if you can save around 91,000 (as you have PF contribution, no need to save 1 Lakh), then your tax will be around 8,475 per month.

Regards,
Sreelatha

Hi Samant Raj,

I want to give you one suggestion that you should think about a home loan. It will give you more benefits to save more tax on your income.

You can invest only one lakh in all kinds of investment plans.

I think you can take a home loan of 10 to 20 lakhs. Home loan installment interest and principal amount will be exempted from your income.

Thanks,

Dinesh

Dear Samant,

This is a brief detail of your tax liability and how much amount you can save as rebate and savings.

Savings:
You can invest in any life insurance policy, mutual fund (covered under 80C, generally high-risk mutual funds are not covered under it), NSC, PF A/c up to the limit of Rs. 100,000.
You can take advantage of the added benefit of medical insurance up to Rs. 10,000. If you are a senior citizen, you can avail of up to the limit of Rs. 15,000.

Loan:
You can get a rebate if you have taken any housing loan, but it is applicable to the interest portion only.
This benefit is also applicable to education loans.

HRA:
If you are living in rented accommodation, you can get a rebate in your salary computation.

If you require a full tax computation, please email me at mannupauri@yahoo.com.

Please find the attached document to review it by yourself.

Hi Samantraj,

Greetings for the day!!

Apart from the savings of Rs 1,00,000 under sec. 80C, you can save up to Rs 1,50,000 under sec. 24(A) with a Home Loan. I am attaching a tax break-up sheet for your reference to check the maximum limit of investments for saving tax.

Regards,

Prem Singh Rawat
The Department of Human Resources

Hey Prem,

Please find attached the IT Declaration for the same salary structure. Let me know if the Income Tax liability can be reduced or minimized any further. :icon14:

Hey Padhu,

It is a Tax Calculator cum IT Declaration Template, and the data has been filled out by me in the blank template.

Hi friends,

I would like to know in detail about the contributions and calculations towards PF, ESI, and professional tax. Can anyone help me straight away?

Thanks,
Suresh

Hi Suresh,

The basic components that every company has are as follows:
- Basic = 50% or 40% of gross
- HRA = 40% or 50% of basic (Depending on Metro & non-metro)
- CCA = 20% of Basic
- Medical = Rs 1250/- per month
- Children Education = Rs 100/- per month (Rs 1200/- per annum)
- Bonus = 8.33% of basic normally (Rest depends on the company)
- PF = 12% of basic
- ESI = depending on gross (if applicable)
- Telephone expenses = Rs 750/- per month

Other components like Travelling Allowances, Food Allowance, Petrol Allowances, etc., completely depend on the company.

This should give you a basic idea about the general Salary Structure.

Hi Cite HR Friends,

I have been through all replies and tax calculation attachments, but you will find that this new calculator will be a real magic for you. Kindly store the attachment on your desktop.

Thanks & Regards,
Shiv Kumar

Hi Ranjana/Sashmita,

I am sending you the tax calculator with a breakdown to your email ids. Please check your ids and stay in touch. My email id is prem.rawat85@gmail.com.

Hi Parthasarathy,

The password for the tax calculator file is "vikas."

Regards,
Prem Singh Rawat

Hi Deepak,

Kindly note the below-mentioned steps for calculating TDS for the year 2008-2009.

1. Firstly, decide the salary break up.
2. Add earning heads (Basic, HRA, Conv., etc.), then deduct exemptions as per the rules and investment declaration (HRA, Conv., etc.).
3. Then calculate the investment (Up to Rs. 1,00,000 under sec 80 and Up to Rs. 2,50,000 in case of Home Loan) as per the investment declaration form submitted by the employee.
4. Then deduct the value of Point-3 from Point-2. After that, we will get the net taxable amount.
5. Calculate the income tax on the net taxable salary as per income tax slabs or put the value in the Excel sheet attached for calculating TDS amount.
6. After calculating the TDS amount, check the amount of TDS that was deducted till date.
7. Deduct that previously deducted amount from the calculated TDS amount and evaluate the net TDS amount for the coming months.
8. Calculate the number of months remaining in a financial year and divide that net tax amount in remaining months and calculate the current month TDS.

Hope this will help you!

Regards,
Prem Singh Rawat

Hi Samant Raj,

Thank you for your tax declaration sheet. However, we do not have PF in our company. In this case, what needs to be done? I attempted to make it null in the sheet, but it is asking for a password to unprotect the sheet. Could you please guide me on how to proceed?

Regards,
Swati