Let suppose these are the allowances and salary mentioned in your annually salary slip.
- Basic Salary = Rs1250000
- House Rent Allowance = Rs515000
- Leave Travel Allowance = Rs50000
- Mobile Allowance = Rs20000
- Books/ Journals/ Magazines = Rs15000
- Petrol Reimbursement = Rs20000
- Special Allowance 10(14)(1)= 180000
- Provident Fund = Rs150000 (12% of Basic Salary) [exempt u/s 80C because its employees contribution]
By Old Regime Your total annual tax would be Rs 429000 i.e. 35750 per month
By New Regime Your total annual tax would be Rs 358800 i.e. 29900 per month
Now see how can we save tax on this:
- Gross salary = Rs 2200000
- Allowances:
- (-) HRA = Rs 500000 [Please see calculation of HRA here: https://myfinanceinfo.com/index.php/2024/01/04/how-to-calculate-hra-i-e-house-rent-allowance/]
- (-) LTA = Rs 50000 [Let suppose actual expenditure is s 60000 but we can claim only 50000 because we are getting only 50000 by salary slip]
- (-) Mobile Reimbursement = Rs20000
- (-) Books/ Journals/ Magazines = Rs15000
- (-) Petrol Reimbursement = Rs20000
- (-) Driver Salary 10(14)(1) = Rs120000
- (-) Uniform Allowance 10(14)(1)= Rs20000
- (-) Helper Salary 10(14)(1)= Rs30000
- (-) Daily Allowance 10(14)(1) = Rs10000
- Net Salary becomes Rs 1415000 after deducting all allowances from gross salary.
- Deductions:
- (-) Standard Deduction= Rs50000
- (-) Deduction under Sec 80 C = Rs150000
- (-) Deduction under NPS section 80CCD = Rs50000
- (-) Deduction under Section 80 D = Rs 75000
- After deducting deductions from Net Salary, Taxable salary would be Rs 1090000.
Now,
By Old Regime Your total annual tax would be Rs 145080 i.e. 12090 per month
By New Regime Your total annual tax would be Rs 358800 i.e. 29900 per month
{NOTE: 1. New Regime amount is same because these allowances and deductions are not allowed in New Regime
2. To claim allowances and deductions you have to keep your bills and invoices and submit it to the employer when he demands}
There are also some other deductions which are common and we can use them for tax saving i.e. 80G (donation), 80EEB(interest paid on loan of motor vehicle) 80EEA (interest paid on loan of house property), 80E (interest paid on loan of education). We will discuss in detail about all sections here: