Financial activities will be evident in the weeks nearing the end of the financial year. This keeps both the employee and employer at the move as the collection of investment proofs will be needed to calculate tax. Tax calculation has become a norm as every year the same activities are repeated. It’s always a pinch to the employee as they find huge part of their salary ends up with the revenue authorities.
Employers and head of department have the power to determine what employees take home. They can also assist in flashing the big tax evictions on the salary. Thus taking a reasonable amount for employees. Studies show that employees give more to the tax authorities and are left with small shares. This is may be lack of knowledge on steps to take to help reduce the amount.
Other sources show that most taxpayers almost all, don’t consult when they are paying for their taxes. Some give more than expected and end up hurting themselves financially. This is referred to as self-medication, seeking advice from tax experts could take a long way. It helps understand where you can save and what to demand.Here we have different plans which will work for private employee and what employer can do to help.
Ways to save on tax.
For private companies there are different ways to save on tax. Namely retirement benefits, some investment and allowances.
Which is known as rent allowance, here no tax is exempted and employees can save on tax from this allowance. Some of the employers and employees have permanent home thus receiving the allowance which can be fully exempted of halfway.
Employees can request for the special allowances, where the employer will count the salary as the allowance. Such allowances don’t get taxed according to section 10 (14). Here we have the education allowance, transport allowance etc.
Leave travel allowance
The leave allowance also saves a lot on tax it can be either to a longer distance or to and from work. The allowance doesn’t receive any tax and employer can help in calculating and structuring your salary in accordance to the allowance.
In India we have variety of benefits which suit employees after and in employment. We have the employee provident fund where the employee contribute and save for their retirement. This amount is tax free. Government and all private companies have to give a gratuity fund which is given after a service of 5 years. The amount is free from tax thus helping employees save. This are some of the blind spot where employees would pay for tax on allowances which don’t attract any tax. Pension funds also are tax free and found in all the companies to help in retirement age.
Health and life insurance
The insurance are directly for the family and employees and go up to RS 25000. The amount is tax free and might go higher to RS 30,000 for senior citizens.