Managing Income Tax

Modified on Mon, 1 Apr at 12:10 PM

TABLE OF CONTENTS


Who is this article for?

  1. Payroll Admins: This will help you understand how to setup declaration cut off dates and take action on employees' declarations
  2. Employees: This will help you understand how to make declarations in Keka


To understand tax declarations, let us first understand what are tax deductions.


What are Tax Deductions?

The Income Tax Act allows for various deductions from the taxable income of individuals. These deductions reduce the taxable income of the employee which in turn leads to a lower tax liability. 

These deductions can be in the form of: 

  • Standard Deduction
  • Deductions under Chapter VI A of the Indian Income Tax Act (Section 80C to 80U)
  • Deduction for specific income like Interest on Home Loans, etc
  • Tax exempt allowances


Why are the Deductions provided?

The deductions are meant to incentivise certain investments or expenses that are deemed desirable by the government. 


What are Tax Declarations?

When an employee chooses to allocate certain part of their income to the tax deductible deductions , he/she can declare the same to their employer to reduce their tax liability and lower the monthly TDS deduction. These are called tax declarations. 



Type of Deductions available to individuals

As we discussed in the previous articles, the Indian Tax Act offers two tax regimes: 

  1. Old Tax Regime
  2. New tax Regime. 

The old tax regime allows for a greater number of deductions, while the new tax regime provides lower tax rates but with fewer deductions. 


Below is table showing some of the tax deductions available under the two regimes: 


ParticularsOld Tax RegimeNew Tax Regime
(From 1st April 2023)
Standard Deduction₹ 50,000₹ 50,000
HRA ExemptionX
Leave Travel Allowance (LTA)X
Other allowances including food allowance of Rs 50/meal subject to 2 meals a dayX
Standard Deduction (Rs 50,000)
Entertainment Allowance and Professional TaxX
Perquisites for official purposes
Interest on Home Loan u/s 24b on: Self-occupied or vacant propertyX
Interest on Home Loan u/s 24b on: Let-out property
Deduction u/s 80C (EPF, LIC, PPF, ELSS Funds, etc)X
Employee's (own) contribution to NPSX
Employer's contribution to NPS
Medical insurance premium - 80DX
Disabled Individual - 80UX
Interest on education loan - 80EX
Interest on electric vehicle loan - 80EEBX
Donation to Political party/trust etc - 80GX
Savings Bank Interest u/s 80TTA and 80TTBX
Other Chapter VI A deductionsX
All contributions to Agniveer Corpus Fund - 80CCH
Daily Allowance
Conveyance Allowance
Transport Allowance for a specially-abled person

It is important to note that these deductions have certain conditions and limits, and employees need to comply with these to claim the deductions.


To read about the deductions in details, click here: Income Tax Deductions


Related Links:

Declaring investments for tax saving

How can employees declare income tax?


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