It’s that time of the year again when you are asked to declare your investments for this financial year. This is done in line with the tax which should be deducted in your monthly salary. When you declare your investments, you claim a certain portion and the rest is deducted as TDS based upon your salary slab and investments.
Many of us get confused over a lot of criteria’s while doing this. Let’s have a look at how to go about this by busting some myths first.
- The declaration in financial year starting is an estimate and does not have to be accurate but should be realistic. Unrealistic declarations lead to less salary in January to March quarter.
- Your investment may increase or decrease over the year.
- All the documents supporting your investments have to be given by the financial year end and not now.
- If an excess tax is deducted, you can claim the return by filling return on income tax website.
Now, there are many headings under declaration which can actually help you in understanding where to put that bonus right away to save taxes. Every portion has a limit of tax exemption. Let’s have a look at various parts of the declaration.
House rent allowance
House rent allowance (HRA) is the rent you pay every month to your landlord. Most of you get HRA in your salary. A part of this salary is exempted under sec 10 (13A).
The deduction available is the least of the following amounts:
- Actual HRA received (refer your salary slip)
- 50% of salary- metro cities & 40% for non-metros or
- Excess of rent paid annually over 10% of annual salary
Note: It is mandatory to provide PAN card details of the landlord if rent exceeds Rs 1,00,000 yearly. Also, if you are staying with your parents you can claim exemption if you enter into a rental agreement between them and pay rent to them. And, if you own a residence and earning rent, then no deduction is allowed.
Leave Travel Allowance
Leave travel allowance (LTA) is the exemption when you travel with your family. This is just a travel cost and doesn’t include any further expenses availed on the trip. This can vary from employee to employee. LTA is given on shortest route to destination and back. One of the most important aspects here is of Block year.
- This exemption is available only for two journeys undertaken in a block of 4 years. For the current year, the block period will be 2018-2021.
- It is only covered on domestic travel & transport means can be air (national airlines, economy class), railway (AC first class tickets) or others (first class, deluxe).
Deductions under chapter VI A
Why wait now? Let’s start with declaring our investments timely.