Pay zero tax if you earn up to ₹16 lakh | Fusion - WeRIndia

Normally salaried employees have to pay tax as per the prescribed limits as most of them receive salary through banks.

However, if you follow certain methods, you can pay nothing as tax even if you earn up to ₹16 lakh.

That means, you can file NIL income returns.

Salary includes several components including basic, HRA (House Rent Allowance) and some other perks. Salary structure is important for low tax payment.

If your HRA comprises 50 percent of your basic salary, then you can get maximum tax benefit of it. Even 40 percent of HRA is also good if you are living in a rented house in a non-metro city.

Car maintenance is tax-exempt up to ₹2,400 per month if bills are submitted. ₹900 per month for driver salary is also a tax-free allowance.

Some companies provide gift vouchers to their employees on the occasion of birthdays and other occasions. Gift voucher of ₹5,0000 per annum is tax free.

Employer contribution in both EPF and NPS are also beneficial to get tax exemption. 10 percent of basic salary in NPS and 12 percent of basic salary in EPF is tax free.

Meal coupons of up to ₹50 per meal and a total of 22 working days in a month is free. ₹2,200 per month and ₹26,400 per annum is tax free.

Phone and internet bill of ₹36,000 per annum, uniform allowance of ₹24,000, children education and hostel allowance of up to ₹4,800, leave travel allowance of up to ₹30,000 and newspaper allowance of ₹12,000 per annum is free if the bills are submitted.

Gratuity, although not a part of salary, but as part of CTC is non-taxable as it is paid while leaving the company.

If your basic salary is ₹8,50,000, then ₹1,87,000 in the form of employer contribution in both NPS and EPF is tax free.

If your salary is ₹16,69,000 (including basic, HRA and all other above perks), then you can compute your taxable income as follows:

Total income                                                                                                                                      ₹16,69,000

Less: Tax free perks (car maintenance, meal coupons etc.)                                                      ₹3,54,000

HRA (50 percent of basic salary)                                                                                                    ₹4,25,000

Standard deduction                                                                                                                         ₹40,000

Tax deductions (under section 80C, 80CCD etc.)                                                                       ₹3,10,000

Home loan exemption                                                                                                                   ₹2,00,000

Gratuity                                                                                                                                             ₹40,000

Total income                                                                                                                                    ₹3,00,000

Less:      Basic tax exemption                                                                                                        ₹2,50,000

Taxable income                                                                                                                               ₹50,000

Tax (5% of 50,000)                                                                                                                           ₹2,500

Less:      Rebate u/s 87A                                                                                                                   ₹2,500

Tax                                                                                                                                                         0

Thus you can pay zero tax by saving with tax free investments and tax-exemption perks.

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