Let suppose these are the allowances and salary mentioned in your annually salary slip.
- Basic Salary = Rs1350000
- House Rent Allowance = Rs675000
- Leave Travel Allowance = Rs105000
- Mobile Allowance = Rs30000
- Books/ Journals/ Magazines = Rs48000
- Petrol Reimbursement = Rs90000
- Special Allowance 10(14)(1)= 540000
- Provident Fund = Rs162000 (12% of Basic Salary) [Rs 150000 exempt u/s 80C because its employees contribution]
By Old Regime Your total annual tax would be Rs 678600 i.e. 56550 per month
By New Regime Your total annual tax would be Rs 608400 i.e. 50700 per month
Now see how can we save tax on this:
- Gross salary = Rs 3000000
- Allowances:
- (-) HRA = Rs 465000 If rent paid is 6 lakh p.a. [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 100000
- (-) Mobile Reimbursement = Rs30000
- (-) Books/ Journals/ Magazines = Rs39000
- (-) Petrol Reimbursement = Rs70000
- (-) Driver Salary 10(14)(1) = Rs240000
- (-) Uniform Allowance 10(14)(1)= Rs45000
- (-) Helper Salary 10(14)(1)= Rs180000
- (-) Daily Allowance 10(14)(1) = Rs40000
- Net Salary becomes Rs 1791000 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
- Loss from House Property = Rs 200000
- After deducting deductions from Net Salary, Taxable salary would be Rs 1266000.
Now,
By Old Regime Your total annual tax would be Rs 199992 i.e. 16666 per month
By New Regime Your total annual tax would be Rs 608400 i.e. 50700 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 deductions here: