How To Save Income Tax Legally

How To PAY ZERO TAX On Income Of 15.46 Lakhs In 2017?
-THE
VIDURA WAY!
March 27, 2017 - Blogs
(Last Updated On: April 14, 2017)

W ith PDFmyURL anyone can convert entire websites to PDF!
Amazed? This is possible if you take the right approach while dealing with your taxes. Today we will show you the secret The
Vidura Way of how to pay ZERO TAX on the income of Rs.15.46 Lakhs!
Here is the quick snapshot:
Normal Way The Vidura Way
Total Income 15,46,000/- 15,46,000/-
Tax Payable 2,97,464/- 0/-
Vidura Way includes these 3 steps, which needs to be followed-

1. Understanding Your Current Income Structure
2. Restructuring CTC to reduce Tax outgo
3. Making best use of available Tax provisions & Deductions.
Still Confused? let me explain , The Vidura Way, with the help of story of two brothers Karan & Arjun. Picture this:
Today is the day when their mom could not hold her excitement and kept repeating to herself Mere Karan Arjun aayenge!
Salary laayenge! and then the magical moment happened followed by a disappointment from Arjun. Even after earning 15
lakhs income Karan paid zero tax and Arjun paid heavy taxes. Let me guess you are wondering what happened back there??
Well, Karan used The Vidura Way which helped him dramatically save his taxes by taking advantage of the nitty gritties of
Tax Laws.
Lets first look at the table, then we will go through the brief description of all the terms listed in it:
Allowance/
Per No. of Amount Taxable
Particulars Deduction
Month Months (Rs.) Income
Exempt
Basic+DA 70,000 12 8,40,000 8,40,000
Transport
1600 12 19,200 19,200 0
Allowance
Childern
Allowance(2 100 12 2400 2400 0
children)
Children Hostel
Allowance(2 300 12 7,200 7,200 0
children)
Free food &

1100 12 13,200 13,200 0
beverage Coupons
Telephone
1500 12 18,000 18,000 0
Reimbursemnt
Uniform Allowance 10,000 10,000 0

D a i l y Allowance
(60*600) 36,000 36000 0
Travelling
Allowance 1,00,000 1,00,000 0
(20*5000)
Medical
15,000 15,000 0
Reimbursement
Club Expenses 20,000 20,000 0
Leave Travel
30,000 30,000 0
Allowance
Gift Voucher 5,000 5,000 0
HRA 28,000 12 3,36,000 2,16,000 1,20,000
Employer
84,000 84,000
Contribution to NPS
Income from
15,36,000 10,44,000
salary

Income /loss from
house property
(house loan interest 2,00,000 -2,00,000
from S.O property)
Other income
Interest From
6500
Saving Account
Interest From Post

3500 10,000
office
Gross Total
15,46,000 8,54,000
Income
Less Deductions
under chapter VI- A
80TTA 10,000
80C 1,50,000
80CCD(1B) 50,000
80CCD(2) 84,000
80D 55,000

80CCG 25,000
80DD 75,000
80DDB 40,000
80E 50,000
80G 20,000 5,59,000 5,59,000
Total Income &

2,95,000
Taxable Income
Below is the calculation of how zero tax is paid on Rs. 2,95,000 .
Total taxable Tax on Next 45,000/- Less- Rebate

Tax
Income 2,50,000 @10% u/s 87A
2,95,000 Nil 4,500 4,500 0
Lets begin with STEP 1:
Understanding your current CTC structure:

A lot of tax planning is hidden in your CTC structure itself. There are many components in your CTC that are 100% tax free,
without any conditions and some are exempt up to certain limits.
Karan saved Rs 56,856/- of taxes because of with these common everyday 100% tax exempt expenses-
Telephone Expenses
Daily Allowances
Traveling Allowances
Uniform Expenses
Even club expenses!
Yes, if above mentioned expenses you incur for ocial purpose and your employer makes them a part of your CTC, you must
claim the tax benefits.
Just in case you have them as a part of your CTC, then dont forget to take tax SAVING advantage.
Now, moving on to the next step i.e. Step-2
Restructure your Income Structure

A little re-jig of CTC helped Karan save Rs.13,535/- of TAXES!!!
Here is the lists of tax exempt expenses with limits:
When/Why Amount of Tax

Allowance/Expense Limit
Incurred Saved(Rs.)
Travel Expense 1600/month

Transport
from home to 3200/month(for 5,933/-
Allowance
office & back. handicapped)

100/month per
Children Education Education Fees of child for max. two 742/-
Allowance Children children
300/month per
Hostel expenses
Hostel Expenditure child for max. two 2,225/-
of children
children
Amount paid by
the employer to
meet the medical
Medical Expense
expenditure of 15,000 in a year 4,635/-
Reimbursement
you and family, on
submission of
bills
Some other expenses , that you incur everyday but did not realize tax benefit attached with them-
Free Food & Beverage Coupons:

Got cafeteria food coupons to munch during office hours? Very yummy right.
Tax department makes food & beverage coupons up to Rs.50 per meal tax free. So, if we calculate the total tax free amount, it
comes to be Rs. 13,200 (Voucher Rs.50 per day*22 Days *12Months) Tax benefit on food coupon- 4,079/-
Now comes our favorite one:

HRA(House Rent Allowance)
Tax Benefit: Its the minimum of :
1. Actual HRA received;
2. 50% of salary if living in a metro city (40% for other cities) ;
3. Rent paid minus 10% of basic salary and D.A.
(HRA exemption Calculation:- (on the basis of rent paid)

(300000- (10% of 840000)= 216000
40% of 840000 =336000
HRA received =336000
Use our calculator to see how much you save. (Tax benefit on HRA- 66,744/-)
This year take your family out for vacation and enjoy dual benefit! How? Lets see in the next one-
Leave Travel allowance:

You can claim expenses of journeys for 2 years in a block of 4 years with your family. The exemption on the fare is limited to
going anywhere in India. However, journey should be with the shortest route. link (Tax benefit on LTA- 9,270/-)
Although the next one contributes lesser amount to the exemption value from taxable income, but its worth if it is saving
your tax.
Gift from company:

If you received any gift from your employer, then there is double reason to cheer. The value of gifts/ vouchers given by the
employer to you or your family member is tax free if the value is up to Rs.5000 in a year. ( Tax Benefit- 1,545/-)
Pin up the lists of all these expenses on your reminder board.

So, next time you meet your manager, make a request to re-jig your CTC to include them to save taxes.
While you are still in trauma of losing your money to Income Tax department in previous returns, let us tell you about this
amazing way of saving tax on house property that Karan used.
Making best use of available Tax provisions & deductions

House Property :
Sold your house to purchase a new one in some time. Save yourself from the high capital gain tax.
How?Let me explain
There is a provision in income tax that states, if you sold your house and intend to buy a new one within a period of 2 years,
then, there is no need to pay the capital gain tax on it. Just deposit the proceeds gained from selling old house, in CGAS
account and buy a new one with this money.
Whats more in case, you took loan to finance the new expensive house. Then, Income Tax has further sweeten the deal.
Use House Loan interest from Self Occupied property!

If your property is the only property you owned and it is SOP (self occupied) or is vacant, then you can claim deduction for the
EMI paid. (NOTE: self occupied property doesnt necessarily mean you live there. Property occupied by Your spouse, children or
dependent parents will be considered as S.O.)
You can claim the amount of interest paid to your bank up to Rs. 2,00,000/- towards interest on home loan in your ITR. This
interest paid is set-off against your other incomes.Thus, reducing your taxable income and tax slab.- (Tax Benefit Rs. 61,800/-
)
Whats more interesting is that You claim both HRA and House loan interest at the same time. You can claim both,
-If you are staying in a rented house, then you are eligible to claim HRA tax exemption. Simultaneously, if you have taken a
house loan then you can claim the house loan benets too. If you have bought a house with the help of a home loan and live
in another house on rent, you can claim tax benet for both. But if the house you bought and the house you live in are in the
same city, you should have a genuine reason for not living in the house that you own. The reasons could be that the house
you own is too far from your workplace, or the commute is very difficult. Read More
Pretty brilliant, right?
Capital Gains on Shares

What Karan planned will leave you awestruck!
Long-term Capital Gains on sale of listed equity:

The capital gain earned through the sale of shares are non taxable. Although exemption is provided only when these 2
conditions fulfilled :
1. The transaction made should be from recognized stock exchange and,
2. The holding period should be of more than 12 months.
So he actually purchased shares, kept to himself for more than 12 months and the income he received on selling them is tax
free now. Bold move but if it saves tax then its worth trying!
Income from other sources:

Sharing my personal experience: once we received a notice from income tax department that my grandma is getting interest
from her savings accounts and FDs and she didnt even know income was taxable.
Remember! what you dont know might hurt you. Such kind of mistakes might lead you to come into Income Tax scanning.
So here are the other sources of income that Karan had:
Savings account: The interest received every year is counted as Income from other source. But, you can claim deduction
under section 80TTA up to Rs.10,000.
Post oce: There are lots of saving schemes and investment plans provided by Indian Post Oce. You can apply for an
account which are transferable from one post oce to other. Interest from Saving account of Post Oce is eligible for
certain tax benefits.
Gift income from relatives: In India the most peculiar form of income is through gifts. There are some benets and relief
given on this type of income. The maximum limit of exempted is of Rs 50,000 for the gifts received from people that are not
relatives. Gift from relatives are tax free.
Deduction u/s chapter VI- A

Have you ever wished to reduce your expenses? You can frame your expenses tax free by making good investment decisions
just like Karan. These are the 10 deductions which he used, to take maximum tax benefit.
80TTA: The deduction under this section allowed on the interest received on savings account. The limit is up to Rs. 10,000
that it will be considered as income from Other source.
80C: Under this section you can claim a deduction up to Rs. 1,50,000 by investing in LIC, Tuition fees, Principal repayment of
housing loan, PPF, NSC, Mutual Funds etc.
80CCD(1B): You can avail an additional benet of Rs.50,000 under this section if you have contributed to National Pension
Scheme. This is over and above the limit of Rs.1,50,000.
80CCD(2): It is the section in which Deduction is available on the contribution paid by employer . It is limited to 10 % of Basic
+ DA. Now this is the one where you gain multiple benets- your employer makes contribution, Your retirement gets
secure and you get tax advantage!
80CCG: Its a deduction in respect of investment under an equity savings scheme. The tax benet can be claimed when
gross total income is less than or equal to Rs.12 lakhs. Under this amount section 50% deduction is given on the amount
invested during the year which is subject to Rs. 25,000.
80D: The tax deduction under this section is allowed on the premium paid on medical insurance.
Deduction limit:
For Self (Below 60 years ) -Rs.25,000 per year
For Self ( 60 years or above ) -Rs. 30,000 per year
For parents (Below 60 years ) Rs. 25,000 per year
For parents ( 60 years or above ) Rs. 30,000 per year
ADVICE: Getting a Medical insurance can help you cover the unexpected health emergency.
80DD: This section specially launched to provide some relief to the people with disability also known as Disable Dependent.
Deduction of Rs. 1,25,000 is allowed in case of severely disability i.e. more that 80% disability and Rs. 75,000 for more than
40% disability.
80DDB: Expenses incurred during the specic ailments (like AIDS, Cancer and neurological disease) are covered under this
section. In case of self or dependent is up to Rs. 40,000 and in case of senior citizen it is up to Rs. 60,000 and very senior
citizen up to Rs. 80,000.
80E: This allows deduction on the interest paid on higher education loan.
80G: If the amount has been donated or given into charity then deduction is allowed . This amount claimed can be made
on 100% or 50% with or without the Qualifying limit.
Want to know the complete deduction lists? Click here to read the complete guide.
We hope that this article made your tax planning journey a little bit easier. Felt something missing or have any query? let us
know in the comments section and we will help you out.
Dont have enough time to look for CA? Heres a TEAM of expert CAs ready to help you 247.
Author
Team Tax2win

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How To Save Income Tax Legally

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How To PAY ZERO TAX On Income Of 15.46 Lakhs In 2017?

(Last Updated On: April 14, 2017)

Here is the quick snapshot:

Normal Way The Vidura Way

Total Income 15,46,000/- 15,46,000/-

Tax Payable 2,97,464/- 0/-

Vidura Way includes these 3 steps, which needs to be followed-

2. Restructuring CTC to reduce Tax outgo

3. Making best use of available Tax provisions & Deductions.

Basic+DA 70,000 12 8,40,000 8,40,000

Free food &

Uniform Allowance 10,000 10,000 0

W ith PDFmyURL anyone can convert entire websites to PDF!

Club Expenses 20,000 20,000 0

Gift Voucher 5,000 5,000 0

HRA 28,000 12 3,36,000 2,16,000 1,20,000

W ith PDFmyURL anyone can convert entire websites to PDF!

Interest From Post

W ith PDFmyURL anyone can convert entire websites to PDF!

80G 20,000 5,59,000 5,59,000

Total Income &

Below is the calculation of how zero tax is paid on Rs. 2,95,000 .

Total taxable Tax on Next 45,000/- Less- Rebate

2,95,000 Nil 4,500 4,500 0

Lets begin with STEP 1:

Understanding your current CTC structure:

Even club expenses!

Now, moving on to the next step i.e. Step-2

Restructure your Income Structure

Here is the lists of tax exempt expenses with limits:

When/Why Amount of Tax

Travel Expense 1600/month

W ith PDFmyURL anyone can convert entire websites to PDF!

Free Food & Beverage Coupons:

Now comes our favorite one:

W ith PDFmyURL anyone can convert entire websites to PDF!

1. Actual HRA received;

2. 50% of salary if living in a metro city (40% for other cities) ;

3. Rent paid minus 10% of basic salary and D.A.

(HRA exemption Calculation:- (on the basis of rent paid)

Leave Travel allowance:

Gift from company:

Pin up the lists of all these expenses on your reminder board.

W ith PDFmyURL anyone can convert entire websites to PDF!

Making best use of available Tax provisions & deductions

Use House Loan interest from Self Occupied property!

Pretty brilliant, right?

Capital Gains on Shares

Long-term Capital Gains on sale of listed equity:

1. The transaction made should be from recognized stock exchange and,

2. The holding period should be of more than 12 months.

Income from other sources:

So here are the other sources of income that Karan had:

Deduction u/s chapter VI- A

For Self (Below 60 years ) -Rs.25,000 per year

For Self ( 60 years or above ) -Rs. 30,000 per year

For parents (Below 60 years ) Rs. 25,000 per year

For parents ( 60 years or above ) Rs. 30,000 per year

W ith PDFmyURL anyone can convert entire websites to PDF!

Depositing Cash? Things to know

W ith PDFmyURL anyone can convert entire websites to PDF!

April 11, 2017 at 1:30 pm

Name Email Subject