How salaried employee save income tax legally on CTC ₹ “14 Lakhs”

Where is good news for the salaried employee, you must earn Tax-free earning up to ₹ 14,33,000/- just by managing Tax-free Segments, No need to pay Taxes? Yes, How to not pay income tax legally?.

Am I writing ₹ 14 Lakhs?


But how is it possible.

Right salary structure and investment in right tax saving plans! makes it possible.

There is a huge gap in the amount cost to company (CTC) and take home amount, the take-home salary includes several amounts in different made along with the basic salary.

Every head belongs to some criteria, and there is an exemption limit for every criteria, which was not counted u/s 80C.

Also Read: Received Income Tax Notice? (Learn about It)

It is very important to understand the salary structure of the company.

Salary Slip

Above format revels different heads in which salary is being paid to the employee, Every head consists of the different amount of different tax exemption benefits.

Transport allowance rebate in income tax

Transport allowance is exempted from Income tax for an employee to meet the expenditure on commuting from residence to place of work up to ₹ 1600 per month & ₹ 3200 per month for a disabled person in any form.

(It is removed in Budget 2018)

Uniform allowance exemption

Uniform allowance is paid to meet the expenditure incurred to purchase or maintenance of Office uniform, Under section 10. Amount up to 2000 per month is tax-free.

Child education allowance

The Amount paid by the employer to the employee under the head of the child eduction, it is exempted by ₹ 100 per month up to the maximum of 2 Children.  

Also Read: Treatment of Taxation for “Agriculture Income” – Complete Guide

 Hostel allowance

Allowance granted to employee up to ₹ 300 per month per child, for the maximum of two children is exempted.

Medical allowance exemption limit

Medical allowance paid to the employee with the exemption limit of ₹ 1250 per month. the amount received above ₹ 15000 annually to the employee will be taxable.

(It was removed in Budget 2018)

Transport allowance & Medical Allowance are replaced in Budget 2018 with standard deduction with the limit of ₹ 40000/- per annum.

Leave travel allowance

Leave Travel Allowance can also be referred as Leave travel concession (LTC), An LTA is a remuneration paid to Employee’s for travel in the country, the LTA deduction is exempted up to ₹ 20000.

Also Read: What is Form 26AS (How does it work filling IT return)

House rent allowance

House rent allowance is the common term, every employee knew about HRA, keeping long-term short, the employee gets the HRA benefit according to three criteria.

  1. An employee is the residence of India, rented a house and pay rent to the house owner.
  2. Must get HRA in any form from its employer.
  3. You must get a proper receipt of rent paid in prescribed format from the owner of the house.

If you are not paying any rent, the whole amount received under HRA is taxable. 

Also Read: Exemption of (HRA) House Rent Allowance u/s 10(13A) – Calculation Guide

Gift vouchers from the employer

If you received the gift voucher from your employer in the form of cash “congratulation”, very few peoples get the chance to get the reward of the remarkable work.

The point is:

The Cash received a gift voucher from your employer up to ₹ 5000 is 100 % exempted.

Newspaper/journal allowance

Some of the corporate provide their employee benefits of newspaper and Journal allowance to acquire knowledge, which in return company use to grow in future, the amount of ₹ 1000 per month is Tax-free.

Also Read: Understand Tax saving options : 80C, 80CCC, 80CCD, 80D, 80U, 80E, 24

Meal allowance

An employee works very hard for the employer, in return employer, provide hot food to their employee in the office premises and the employee is free to bring tiffin boxes into the office.

Food allowance is Taxable if it exceeds ₹ 50/- per meal (considering 2 meals per day), it might is considered 22 working days per months. Total amount calculation is ₹ 26400/-

Phone & internet bill reimbursement

Every employee works in the office and uses phone and internet for office work if the question arises of reimbursement of Phone & internet bill reimbursement.

You can easily claim ₹ 1000 as phone allowances and ₹ 2000 as internet charges.

In Totality ₹ 36000/- per annum.

zero income tax

Other than above:

National pension system allowances

National pension system allowances granted to the employee is exempted by 10% of the basic salary for the employer contribution.

Also Read: How To Check Income Tax refund Status? – Simple steps by step guide.

Employee provident fund

Employee Provident Fund deducted from the salary and the same percentage is paid by the employer, which is 12% of the basic salary. The amount of EPF is fully Tax-free.

Above is the deduction which is not in use while filing the Income tax return, this formula reduces the taxable value on Gross income.

zero income tax

If you look closely at the above Example, it is observed that, if you earn up to ₹ 14.33 Lakhs, you need not require to pay any taxes.

The benefit of the standard deduction and deduction u/s 80 workouts for you and help you to pay zero income tax.

Also Read: Effect of NPA in Banking Sector

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