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Blog Article 2022 (5)

What is a Revised Return?

I hope you have already filed your Income Tax Return. Generally, you need to file your Income Tax Return by July 31 of any year unless extended by the government. However, at times in order to meet the deadline, we may forget to disclose some income or may make unintentional mistakes like a mistake in claiming any deduction.

In such a situation, you can always file a revised return. 

What is a Revised Return?

A revised return is a return that is filed u/s 139(5) as a revision for the original return. It is a revision for any omission or mistake made in the filing of that original return. In order to meet the deadline, a person may forget to disclose some income or may make any other mistake like a mistake in claiming any deduction.

For example: If a Return of Income is filed by the assessee for the Financial Year 2020-21 i.e. Assessment Year 2021-22 and he later discovers some mistake, he can file a Revised Return of Income Tax anytime up to 31st March 2019 or before the completion of the assessment whichever is earlier.

Return eligible for revision

  • The original return filed u/s 139(1).
  • The belated return filed u/s 139(4) can also be revised now.

Points to keep in mind while filing a revised return:

  • ITR form can be changed while revising of return.
  • No penalty can be levied by the department for bonafide mistakes (unintentional)
  • If the assessing officer discovers that the error/ omission was intentional/fraudulent return revision of the return is not allowed and a penalty may be levied.
  • Interest under sections 234B and 234C will be recalculated under every revised return.
  • If the taxpayer has revised the return after the survey/search and it was has found that the mistake in the original return was not bonafide then the levy of penalty is justified.

Time Limit

Revised Return of Income Tax can be filed by an assessee at any time

  • Before the end of the relevant assessment year; or
  • Before completion of the assessment

whichever is earlier.

For example: If an assessee files the return for F.Y. 2020-21 (A.Y. 2021-22) on 8th July 2021. And later on, if he discovers some mistake, then he can file a revised return of Income Tax anytime up to 31 March 2022 or before the completion of the assessment, whichever is earlier.

Here is how to file a Revised Income Tax Return:

  • Visit the Income Tax website, now login into the Income Tax e-filing portal by entering PAN/ Aadhar/ other user ID.
  • After logging in, you need to select your assessment year and select ITR Form Number.
  • After that after under ‘Filing Type’ select ‘Revised’
  • Now under the ‘General Information tab, choose the ‘return filing section’ as ‘revised return’ under Section 139(5) and the ‘return filing’ type as ‘revised’.
  • Now enter the acknowledgement Number and Date of filing of the original return. (It is compulsory to enter the 15-digit acknowledgement number when filing a revised ITR).
  • Carefully fill in or correct relevant details of the online ITR form and then submit the ITR.
    Finally, e-verify the returns for faster processing and a quicker refund.

Wealth Cafe Advice: 

Usually, mistakes/errors take place when you sit to file your ITR during the deadline period. Make sure you are ready with all the documents and be prepared to file it well in advance  - this will also help you to get your refund on time. However, if you still discover a mistake after filing the original return, rectify it yourself by filing a revised return or consult your accountant rather than waiting for the Govt to send a notice.

Blog Article 2022 (4)

What are the investing habits of millennials?

One of the largest generations in history is about to move into its prime spending years. Millennials are poised to reshape the economy; their unique experiences will change the ways we buy and sell, forcing companies to examine how they do business for decades to come.

Who are they?

Millennials or Generation Y are people born between 1981 and 1996. Currently, they constitute a third of India’s population, and 46% of the current workforce. For many, this generation is an enigma when it comes to many things. Whether it’s managing relationships, careers or wealth, they’ve presented the world with new ideas and strategies.

How are our millennials investing?

Some financial habits of millennials tend to come across as alarming to the previous generations. Especially Generation X who have worked hard to get themselves out of financial ruts.

These habits include spending more, experimenting with investment products, and enjoying the benefits of Credit Cards. However, the broader view is that millennials, while splurging on interests or passions, are equally aware of the need to build a corpus for a secure future. Moreover, they may be prone to experimenting with new financial products but will choose traditional options too.

Let us have a look at the money-making habits of millennials:

Starting early and diversely!

Trends suggest that millennials believe in starting early, given that on average, most investors are 28 years of age. More than 30 percent of the investors fall between the age of 26-30 years old, with the second most populous category (at 29 percent) belonging to those between 18-25 years. Even when it comes to starting with popular retirement savings options like NPS (National Pension Scheme), the starting age is 32.

When it comes to investing preferences, the young guns prefer mutual funds (64 percent), followed by equity (28 percent), and lastly, gold (8 percent). In fact, gold, traditionally seen as an inflationary hedge, saw a Y-o-Y increase of 59 percent in investors' portfolios.

Mutual Funds top the chart

56% of millennials invest in Mutual Funds. Turns out, our millennials ace financial discipline and regularity in terms of Systematic Investment Plans (SIPs). Turns out, our millennials ace financial discipline and regularity in terms of Systematic Investment Plans (SIPs). On average, the user undertook around 10 lumpsum and 19 SIP transactions, with the average amount invested growing by around 29 percent. Moreover, 76% of users transacted in SIPs, a healthy figure.

Source: Moneycontrol

Day trading, investing in stock markets, IPOs

Lockdowns and work from home have given many millennials enough time to keep a track of stock market developments. Access to easy-to-use mobile apps has made day trading a lucrative side income option for millennials.

Indian millennials are also bullish about IPOs of new-age companies. They are not scared of the stock market risks

Investing, trading in cryptocurrencies

Even as cryptocurrencies are not regulated in India, millennials are the largest force behind the popularity of these new-age digital assets. Easy access to crypto exchanges through mobile apps and the active interest of millennials’ role models like Elon Musk have further pushed millennials towards cryptocurrencies.

Millennials in general are drawn towards a culture of earning passive income on their time and investments. Crypto investments are very popular for this age group, in fact, more than 50% of investors are millennials. They are open to learn this new technology (Blockchain) and explore new opportunities that come with it— Decentralized finance or Defi, staking, liquidity pools, NFTs are such new and trending opportunities

As age progresses, their investment pattern also evolves. So for instance, while people in their teenage and early 20s indulge more in crypto trading, the senior folks consider more evolved forms of investing such as a Fixed Income Plan or a SIP aligned to multiple goals.

Creating value from the gig economy

Multiple online platforms are enabling Millennials to make extra money, apart from the regular job, by making the best use of their skills through freelance gigs.

While millennials need to work on their spending, saving, and long-term investing habits, being more money mindful. One lesson that can be learned from them is leveraging earning opportunities. The gig economy today has enabled the generation to effectively make use of their skills and capabilities and create value.

Automating wealth creation

Millennials are creating a new habit of money-making by automating the process of investing or wealth creation itself!

Currently, they are doing it by setting up auto-debit for their mutual fund investments closer to the date when their salary gets credited. Moving forward, they will be able to set up triggers for automated investing throughout the month based on the transactions in their linked savings account.

Investing in Digital Gold

Digital gold is increasingly becoming the asset of choice among millennials to create and protect wealth. Millennials look for ease of investments and higher returns but also for assets that help them fulfill their aspirational needs and are a good emergency corpus.

Conclusion

Millennials are different when it comes to financial planning. They are willing to take a risk to earn higher returns. This generation is called tech-savvy and gadget-savvy, and it’s time to be investment savvy also!

To learn more about mutual funds enroll in our course- NM 103: Basics of Asset Classes

How to Add Biller for SIP Transactions in Banks for Net Banking?

As we all know, SIP or Systematic Investment Plan is an investment mode in Mutual Funds where investments happen in small amounts at regular intervals in the Mutual Fund schemes. You can invest in SIP via Bank Mandate or through Net Banking. 

In this article, we will focus on the Net Banking Mode. 

In Net Banking Mode, adding a biller is an important step as it automates your investment, meaning your instalment will automatically get debited from your account at a specified date every month. If you do not set up the biller, then all your future instalments will not execute. 

Please note that the process of adding a biller is different for different banks. In this article, we have used Kotak Mahindra Bank as an example.

Step 1: Log in to your Net Banking account

step 1

Step 2: Click on Payments/Taxes

step 2

Step 3: Select the right mutual fund - Kotak mutual fund in our case of SIP setting up

step 3

Step 4: Add the details on this page of URN number and select the entire bill amount as the option. You will get this number when you create/setup SIPs online after that transaction is submitted.

step 4

Please Note: Do not forget to mention your URN Number. It is generated for every SIP you initiate online to add/confirm your online transfer of funds. It expires in 7 days from the first date of KYC Registration.

Step 5: Add biller and confirm

step 5

If you wish to learn more about how to invest in Mutual Fund Online you can check our Youtube Playlist: Software and Tools for it and to learn more about Mutual Funds check out our course - NM 104: Basics of Mutual Funds.

Blog Article 2022 (1)

How can you get started with Cams online?

We always get messages on our social media handles about which platform should they use to invest in Mutual Funds. And the only platform that we always recommend is CAMS ONLINE!

In today's era, we have so many platforms to invest in a mutual fund, but with so many options comes a huge amount of confusion as well as complications!

What is CAMS?

CAMS stands for Computer Age Management Service. It is a SEBI-registered Registrar & Transfer (R&T) Agency that provides a single gateway to 17 CAMS serviced Mutual Funds.

While investing through this platform you don’t have to deal with multiple PINs, folio numbers and login IDs as this platform is easy and convenient to use. It also provides a consolidated view of Mutual Funds (which are serviced by CAMS) invested across platforms, demat accounts and others. 

So why do we recommend Cams online over other private platforms?

Despite offering a variety of services, CAMS is considered a safer platform as far as data privacy and transparency are concerned. It follows very stringent data policy measures to ensure your personal data is secured at the maximum level.

Also, since myCAMS is not a B2B partner, they do not market themselves nor do they promote any mutual fund schemes. However, the mutual fund mobile apps that are now trendy are more exposed to the mutual fund schemes that app owners are advertising/promoting through recommended portfolios or as top funds. In short, Cams online ain’t biased, nor would they sell any scheme in any manner.

How can an existing investor, invest through Cams Online?

I have invested in Mutual Funds through different platforms, how can I continue to invest in it through Cams online? 

  • Visit mycams.camsonline.com
  • Click on ‘New User’ to create a new user.
  • In the ‘New User Registration screen, click on Register under existing investor with cams.
  • Enter the registered email id and mobile number. Click on Submit.
    (On completion of the registration process, an alert confirming the same is displayed on the screen)

You will receive a confirmation email 

How can a First-time Investor Invest from CAMS? 

  • Visit mycams.camsonline.com
  • Click on ‘New User’ to create a new user.
  • In the ‘New User Registration screen, click on Register & Transact under First-time investor to Cam's service funds.

Now that you have registered, check your KYC status - go to https://camskra.com/ and provide your PAN details.  

If you have not completed your KYC, you need to complete your KYC registration before you start investing. Following are the documents required to complete your KYC process:

  1. Aadhar Card Soft Copy
  2. Pan Card Soft Copy
  3. Cancelled cheque along with your name on it.

The next step is to update your Bank Emandate!

Bank E Mandate is a standing instruction to a bank to debit your account on a periodic basis for a periodic transaction like Systematic Investment Plans (SIPs) / Target Investment Plan (TIP). This process is entirely digital end-to-end with no involvement of any physical forms or signatures at any point of time, nor do you have to issue checks for SIPs each month. 

E-Mandate can be registered within 2-3 days and you can commence your SIP in less than 7 days unlike a wait of over 30 days in the alternate scenario. Therefore, the bank mandate plays an important role by making your investing experience simple and convenient.

However, before applying for the E-Mandate ensure that your PAN number is mapped to your bank. Also,  your PAN needs to be linked to your Aadhar; otherwise, the application could get rejected.

Steps to complete your Bank E Mandate process: 

  • Go to: https://mycams.camsonline.com/camsapp/mycamsemandate.aspx
  • You will get an OTP on your email as well as your phone number after you submit your Pan number and Email Id.
  • Once you enter the OTP, you get the ‘Register Emandate’ screen
  • Enter your bank details correctly
  • Next, the mandated amount should be filled (the maximum amount per transaction can be Rs 1 lakh). You can also choose the transaction period for which you want the mandate to be valid.

Wealth Cafe Advice:

Though other apps may look convenient or easy to use in comparison to Cams, however, it is important to note that this is a much safer platform contrary to the other private platforms. 

We hope you have understood how you can get started with Cams online. To learn more about Mutual Funds you can check out our course: NM 104: Basics of Mutual Funds

Blog Article 2022 (2)

Should You Buy A House Using EPF?

Buying a house is one of the biggest/most expensive purchases for most of us.

You may lack the funds required to make a purchase even when property prices remain stable or fall. As we all say one has to strip naked financially in order to buy a house and in such a situation the thought of breaking your EPF investment may come across your mind.

But is funding your house using EPF a good idea? Let's discuss it

Firstly, let us understand the withdrawal rules of EPF

You are allowed to withdraw EPF accumulations to make down payments to buy a house or for paying EMIs of a home loan. Let us understand it individually:

For Purchasing or constructing a New House-

  • In accordance with Section 68B of The Employees’ Provident Funds Scheme, 1952 (‘EPF Scheme’), you can withdraw: 24 months of basic salary plus dearness allowance (DA) or actual cost of the plot - whichever is lower
  • For this, you should contribute in your EPF account for at least five years.
  • The minimum balance in the EPF should be INR 20,000, either individually, or together with your spouse, if he/she is also a member of EPFO.
  • The house in question should be in your name or jointly with your spouse.
  • You would need a letter of authorization from your employer for PF withdrawal if you have not verified your Aadhar Card.

For Repaying Home Loan-

  • For the purpose of repaying the outstanding home loan, the PF member is allowed to withdraw up to 90% of the corpus if the house is registered in his or her name or held jointly.
  • For this, you should have at least three years of service after opening the EPF account.
  • If PF/EPF withdrawal is done before 5 years of opening the account, then the amount is taxable.

The provident fund scheme allows you to withdraw funds, only up to 36 months of your basic salary plus DA  for any of the above purposes. Also, you can withdraw from it only once in your lifetime.

Does breaking EPF for buying a house make sense from your entire financial planning perspective?

EPF is an opportunity to accumulate money for the post-retirement period. You keep contributing a small fraction of your salary to the EPF and your employer matches your contribution. As the salary increases, the contributions do go up. That makes a large corpus in your hand for your retirement, provided you do not withdraw it for any other purpose. You let the magic of compounding work for you by investing regularly and consistently in your EPF corpus.

For example, an EPF contribution of 16,000 per month from the age of 25 - increasing at 10% per annum would become a corpus of INR 3.27 crore on retirement. Now, if you withdraw 90% of the corpus at 30 i.e. INR 17.1 lakhs amount. At 60, your corpus will only be INR 2.29 crore.

You are reducing your actual retirement corpus by INR 98 lakhs approx.

Hence, you should not withdraw your investment from EPF before its maturity as this could jeopardize your retirement by exposing you to the risk of leaving no funds/reduced funds for your retired life. Remember, no one will give you a loan for your retirement but for a home, you can manage.

We do understand that a house is a necessity and in the Indian context ‘owned house’ is a social and psychological need for many of us. But, short-term thinking’ focused on immediate gratification must be avoided at any cost.

How to arrange for the downpayment of your house?

It is better to make a plan for home buying. Start saving money to accumulate the down payment amount over three to five years. If the home prices go up or your investments yield less than expected, you may want to delay the home buying by a year or two. Avail of the home loan after you make the down payment but do not touch your EPF money. That is your retirement security.

Wealth Cafe  Advice

Do not break your one goal to achieve another. Especially when it is the retirement goal. Do not break your EPF for home buying, unless you have other means to secure your retirement. Plan ahead and plan properly.

Check our course - Money & Makaan - to learn to plan for home buying

Difference between NPS and EPF - which one should you opt for?

In Indian scenario, NPS (National Pension Scheme) and EPF (Employees Provident Fund) are two viable options for ensuring a financial cover in the absence of a regular income or as a corpus that can be used in times of need. 

However, not investing in the right instrument can mean you are losing out on the potential returns of your investment. For instance, while EPFO invests predominantly in debt instruments, investing in NPS promises higher returns over the long term.

Find out how they differ from one another:

CriteriaNational Pension SchemeEmployee Provident Fund
A/C openingMandatory only for government employeesMandatory for every establishment employing more than 20 or more employees
EligibilityAge: 18-65 (Indians + NRI) - can be opened by anyoneOnly for salaried Individuals
InvestmentIt is a market-linked product. Its performance depends on the equity and debt marketThe Central Board fixes the interest rate for the year - government debt investment. 
Tax BenefitTax deduction of INR 2 lakhs under section 80C and  CCDYou can avail tax deduction of INR 1.5 lakhs under section 80C
Fund ManagerLiberty of choosing your fund managerDo not have the liberty of choosing a fund manager. The funds are invested by EPFO
Min Investment500/ year12% of salary per month or 1800, which can be increased voluntarily. 
Max investmentUnlimitedUnlimited (however, taxability varies)
Return8%-15% ( depending upon which funds you are investing your money in)8.5% (Interest as on September 1, 2020)
Lock in period & ExtensionAge: 60

Extension: 70

Age: 58

Extension: 60

Premature WithdrawalPartial withdrawals can be made up to 25% of the subscriber’s savings, but only after the 10th year of subscription.Partial withdrawal is allowed after 5 years of EPF when you fulfill certain conditions such as buying a new house, marriage, child education, sickness, death, etc. 
WithdrawalYou will get 60% of the corpus and 40% will be invested in an annuity for a monthly pension.

Read here- to know more

You will get the entire corpus after retirement.
Expense Ratio0.01% (also varies - it is  not fixed)0% (No expense ratio)
RiskLow risk (Market Dependent)No-Risk
Employer ContributionCan be doneEmployees along with the employers both contribute 12% of the employee’s basic wages towards EPS

Let’s assume, two friends Sanjay and Yogesh started saving for their retirement in 2021. Both of them are 23-years-old and want to retire at 60. Also, they plan to continue this investment until 2058, at the time of retirement. However, Sanjay has invested in NPS and Yogesh in PPF.

NPS vs PPF: Difference in the retirement corpus
SanjayYogesh
Investment Product pickedNPSEPF
Average annual return12.90% (Growth profile)8.5%
Investment amount every monthINR 10000 (10% of Basic salary & DA)INR 12,000 (12% of Basic salary & DA)
Investment time period37 years37 years
Investment in 37 yearsINR 44.4 lakhsINR 53.28 lakhs
Retirement corpusLump-sum value: INR 7.33 crore

Annuity Value: INR 4.89 crore

INR 1.44 crore

NPS is devised as a pension scheme. So, you get to withdraw 60 percent of your accumulated corpus at retirement without paying any taxes. The remaining 40 percent must be converted into an annuity instrument (from an insurance company) and get monthly payments.

The primary reason for the difference in their corpus is the power of compounding. Since the last few years, the interest rate for EPF has been decreasing. At the same time, there are chances that NPS can give you more returns in the future (where the equity markets perform well) w.r.t a higher risk of the equity exposure in NPS. So, while they reach their retirement age, there is a probability that this difference might increase further. 

Wealth Cafe Advice

Opting for EPF or NPS is a matter of choice based on specific needs and projected requirements. Both come with their set of merits and demerits. Subscribers at an early age or with risk-bearing capacity should subscribe to NPS and opt for equity allocation based on their risk profile to accumulate large corpuses targeted to fund retirement needs. Where you believe your risk-taking capacity is not very high and you will find it difficult to manage NPS post-retirement - EPF has always been a classic option for your investments. 

However, in both scenarios, investors should not touch their retirement corpus for other financial goals. You should always mark these investments only for retirement.

To know more about EPF and NPS you can read the following articles:

Things to note about HRA and FAQ of HRA

Many times, people have to move to a different city in order to work. In such cases, they may end up paying rent for accommodation. Organizations often compensate employees for this expenditure by paying them a house rent allowance over and above their basic pay. This is usually a part of the salary structure. However, HRA is eligible for income tax exemption and can be a great way to reduce your taxable income.

Quest 1. What if I have a Home Loan as well? Can I claim a deduction on home loan interest?"

Ans. Yes. HRA has no bearing on your home loan interest deduction. Both can be claimed simultaneously. 

Read this article for more details- Can I claim Tax Benefit on both HRA & Home Loan?

Quest 2. “My employer doesn’t provide me with HRA? Am I losing out on saving tax?”

Ans. Not at all. If you are making payments towards rent for any furnished or unfurnished accommodation occupied by you for your residence, but do not receive HRA from your employer, you can claim a deduction under section 80GG.

However, certain conditions must be fulfilled to claim this deduction:

  • You are self-employed or salaried
  • You have not received HRA at any time during the year for which you are claiming 80GG
  • You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of office, or employment or carry on business or profession.

In case you own any residential property at any place other than the place mentioned above, then you should not claim the benefit of that property as self-occupied. That other property would be deemed to be ‘let out to claim the deduction under section 80GG.

Quest 3. “So how do I claim the Section 80GG deduction?”

Ans. The least of the amounts below will be considered as the deduction under this section:

  • Rs 5,000 per month
  • 25% of Adjusted Total Income
  • Actual Rent less 10% of Adjusted Total Income

Adjusted Total Income means Total Income less long term capital gain and short term capital gain under section 111A and Income under section 115A or 115D and deductions 80C to 80U (except deduction under section 80GG).

Quest 4. “I am living with my parents. How do I claim the HRA deduction?”

Ans. Let’s understand this through a case: Ms. Sonam works at an MNC in Bangalore. Her company provides her with a house rent allowance. But she doesn’t live in rented accommodation; she lives with her parents instead. How can she make use of this allowance?

Sonam can pay rent to her parents and claim the allowance, provided they own the place they currently live in. All Sonam has to do is enter into a rental agreement with her parents and transfer money to them every month.

This way Sonam can make a nice gesture and give something back to her parents, and also save some tax.

Important: Sonam’s parents will have to show the rent she paid in their income tax returns. But as a family, they will save up. They can generate their Rent Receipts.

Ques 5. “I have forgotten to submit rent receipts to my employer. How can I claim the HRA tax benefit now?”

Ans. The good news is that HRA can be claimed directly on your income tax returns. . All you have to do is manually calculate the HRA tax exemption and then report this as an expense under Section 10(13A) in ITR1. You will also need to declare this in Form 16 - Part B. You will then be able to claim a refund of tax that has been deducted in excess.

Ques 6. Can the maintenance charges that I pay for my apartment be included for HRA tax exemption?

Ans. No. HRA deductions are allowed only for rent payment. Maintenance charges, electricity charges, utility payments, etc. are not included.

Ques 7. Can a self-employed taxpayer claim HRA?

Ans. No, a self-employed individual cannot claim HRA exemption under the Income Tax Act, 1961. A salaried individual having an HRA component in their salary structure can claim HRA exemption under Section 10 (13A) of the Income Tax Act.

Crackdown on tax evaders

Submitting fake rent receipts has been one of the most common ways for individuals to reduce their taxes, despite it being unethical. However, the new rules put in place by the Income Tax Appellate Tribunal (ITAT) are expected to change all this. Assessing officers can question individuals and ask them for additional documentation if they feel the rent receipts provided are not adequate proof. This is just one of several measures that the government has put in place to curb instances of tax evasion and black money.

Failing to comply with these rules and providing fake rent receipts is considered fraud, and could result in serious consequences.

 

So, ensure you are well versed with the tax filing process and that you have all the necessary documentation in place for filing returns. It will make the entire process smoother and quicker for you. 

What is an allowance? What are the types of allowance?

Taxpayers are usually aware of deductions under Section 80C of the Income Tax Act or for which they are eligible. However, it is noticed that taxpayers are unaware of the taxability of allowances and the exemptions available under different sources of income.

If you think that your entire salary is liable to taxes, then that is not true. Your overall package, often known as CTC, comprises many allowances. 

While your basic salary is fully taxable, there are other benefits offered to the employees in the form of allowances and prerequisites. These allowances are offered to employees for the expenses they bear during work. There are three types of allowances:

  • Fully-taxable allowances

The fully taxable allowances are not exempted from Income Tax. You have to pay the full tax applicable to these allowances.

  • Potentially taxable allowances

The partially taxable allowances are exempted from the Income Tax to a limit.

  • Fully Exempt allowances

The non-taxable allowances are exempted from the Income Tax fully. But, these are usually offered to government employees.

Let’s see how these allowances can impact your take-home salary.

Fully-taxable allowancesPotentially taxable allowancesFully Exempt allowances
Basic SalaryHouse Rent AllowanceFood Allowance
Dearness AllowanceLeave Travel AllowanceChildren education allowance
Special AllowanceCar Maintenance AllowanceConveyance Allowance
Overtime AllowanceDaily Allowance
BonusAcademic and Research Allowance

 

Wealth cafe Advice

As soon a person joins an organization, s/he is provided with the breakup of the fixed salary and allowances. However, most of the time individuals are ignorant about taxation. But allowances can help employees save taxes provided they are placed in the salary intelligently.

Salary restructuring is not possible in every organization, but if possible, employees should try to include allowances that are non-taxable or are partially taxable in nature. This way they can reduce the tax liability to some extent.

Thus, one should take note that through intelligent planning one can use allowances to save taxes and reduce the tax outflow.



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