Samira Rao is the Cofounder of Finjinn – A payroll app that runs salary & compliance payments for small businesses on autopilot. He heads product development and Marketing at Finjinn. He is a Chartered Accountant with 17+ years’ experience in corporate law, audit, accounting, consulting, advisory, taxation, and allied fields.
What is one common thing that most salaried employees hate?
No, we are not talking about bosses here. It’s the income tax. Yes, the dreaded income tax that takes a significant portion of employees’ earnings away from them and reduces their take home salary.
And they just can’t do anything about it except complaining about how they don’t get any extra benefits from the government despite paying so much income tax.
Well, ‘the only things certain in life are death and taxes’, is what they say and there is nothing that can be done about death (at least not until now).
But there is a lot that can be done about the income tax. While you can’t escape taxes completely, the technology can definitely help you in minimizing the taxes.
So, let’s look at ways how modern technology is helping employees in saving income tax and taking home more salary.
HR Tech creates awareness about all options of tax savings
The biggest problem that employees face when it comes to saving taxes is that they don’t know about all the options in which they can invest to save taxes.
Most employees know only the popular options of tax savings such as life insurance and mutual funds, but they don’t know about sections such as 80EEB where they can save up to 1.5 lakhs rupees on the interest paid on loans of electric vehicles.
This is a big problem, and the HR tech solves it magically. Most payroll software products list out all options for tax savings in one screen and employees can view it from the employee self-service apps on their smart phones.
Listing of all options for tax savings is very helpful as employees now know every single option to save tax and can make the investments in relevant sections.
HR Tech shows tax savings in real time
Knowing only the options to save tax is not enough, but you also need to know the impact of investments in various options on tax savings.
E.g., even if you invest Rs. 5 lakhs in various sections of 80C such as LIC and PF, you will get the benefits of tax savings only on Rs. 1.5 lakhs as the maximum limit for tax savings in 80C is capped at Rs. 1.5 lakhs.
So, from the angle of tax savings, there is no point in investing more than Rs. 1.5 lakhs in 80C. This is where the technology comes to your rescue.
e.g. HR Tech products such as Finjinn show you tax savings in real time based on your investments. They show you the maximum amount that you can invest in each section for tax savings, and once you enter any number in any section, such products will show you the tax that would be saved.
You can increase or decrease your investments in various sections, and you will get real time reports on the impact of those changes on your tax savings.
Not only that, such products also show you the taxes that have been already deducted and what are the taxes that will be deducted in the upcoming months so that you can plan accordingly.
It helps you in deciding which income tax rules you need to choose
To simplify income taxes, the Indian government has created a new tax regime which automatically gives you the benefits of some tax deductions, and you don’t need to make any investments to save taxes in that regime.
The new regime works well for many professionals who don’t invest much, but it doesn’t work well for professionals who make a lot of investments. And therefore, the government has given the option to choose between the old regime and the new regime.
But how do you know which regime you should choose, and which will help you in taking home more salary? Well, the technology is at your service again.
Many HRMS such as Paybooks show you the tax deducted in each regime side by side and give you an option to choose the regime that you want. Easy, isn’t it?
Just check which regime helps you in saving more tax and choose it with a click. Simple.
It designs salary structures that help in saving taxes
How much income tax you can save depends not only on your knowledge and awareness, but it also depends on the salary structures created by your organization. E.g., even if you know that you can save income tax by declaring investments in leave travel allowance, it is of no use if your company doesn’t offer leave travel allowance as a component in your CTC structure.
And just like employees, even small business owners are not aware of the best salary structures that can help their employees in saving taxes. And again, this problem is solved by the new age salary payment apps.
These salary payment apps automatically create the most tax compliant salary structures that will help employees in saving maximum taxes.
They automatically break down the salary of employees into various components such as flexible benefits plans, leave travel allowance, basic, HRA, etc. and help the employees in taking home more salary.