The Indian tax system has changed with the growth of the economy. It includes direct taxes such as income tax and indirect taxes such as GST. For the upcoming 2024-25 tax year, the government has decided to keep the income tax rates unchanged. So, taxpayers can choose between the old and new tax rules while filing their tax returns.
Many people are wondering whether they can save tax under this new system. Here are some tips to help taxpayers save on taxes in 2024-2025. These tips will help people understand the new rules and take advantage of deductions and exemptions to reduce their tax burden.
Here are some tips to maximize tax savings under the new tax system.
Taxpayers with disabilities: Transportation transfers are permitted with some restrictions to meet mobility needs.
Job creation allowance: On hiring of new eligible employees, employers are given the opportunity to deduct up to 190 per cent of the additional labour costs under section 80JJAA, primarily for the purpose of creating new jobs.
Transport allowance: As per section 10(14)(ii), an exemption of up to Rs 1,600 per month or Rs 19,200 per year can be claimed for commuting or travel expenses.
Gifts/cash: Currently, gifts in the form of gifts or cash up to Rs 50,000 can be claimed as tax-exempt for the relevant tax year to exempt an individual from paying tax on such income.
Travel reimbursement: Local transport and other expenses incurred on official tours and travel, especially in case of work-related travel, are considered as tax-exempt to reduce tax liability.
NPS Contributions: Employer contributions to an employee’s Tier I NPS account are eligible for deduction under Section 80CCD(2), subject to a maximum limit of 10% of salary in case of new generation companies and 14% of salary in case of government companies. New generation. This deduction encourages people to save for retirement.
Daily Allowance: Routine and necessary day-to-day expenses paid by employees on business trips and transfers are recognised by the tax system and hence such gifts are tax deductible:
Interest on Home Loan: This means that each person can get interest up to 200,000. Home loans can be paid and claimed as deduction irrespective of whether the house is occupied by him or his family. These taxes also discourage renting out property and favour home ownership as the entire interest is deductible in case of renting out the property.
Extra Benefits Tax: Extra benefits are actually extra pay on top of the regular wages or gifts from employers to employees etc. Some of these extra benefits are subject to flat tax rate of around 30% on the total amount of benefit granted.
Voluntary Retirement Scheme (VRS): The government gives a free hand to employees who retire voluntarily while claiming exemption from tax and they can get exemption up to 500,000 rupees under section 10(10C). This exemption will reduce your costs during the transition period and allow you to use it without any major issues.
Severance pay: Long service is also recognised and employees who have worked for a company for a long time can apply for an exemption of up to Rs 2 million under Section 10(10). This recognises their commitment to a career in the arts and provides financial support.
Payment of leave encashment: This means that private sector employees can receive a leave entitlement of up to Rs 300,000 under certain conditions, such as if they have accumulated leave upon retirement or termination of employment. In this case, the employer can pay the employee a lump sum in lieu of leave entitlement. However, as Nelisa explained during the interview, civil servants are allowed to claim full leave entitlement. This is considered an exemption from the relief fund aimed at supporting employees who tend to accumulate large leave balances.
Standard Deduction: From the next financial year, a standard deduction of up to Rs 50,000 will be provided to taxpayers opting for the new tax regime. This is a way to deduct a certain amount from your total income and minimise your taxable income while still availing some benefits.
Family Pension: Example: Anyone who dies while in service is entitled to a family pension. This income is eligible for deduction under Section 57 (IIA) so that the surviving family members get some compensation.
Agniveer Corpus Fund: Moreover, there is a new addition under 80CCH(2) whereby charitable donations are also eligible for deduction. This deduction is aimed at encouraging people to donate to the Agniveer Corpus Fund which will be donated to various charitable organisations.