3 Practical Tips to Reduce Your Salary Tax Burden

This article explores practical ways to potentially reduce your tax liability. Remember, tax laws can change, so consulting a professional is recommended for specific advice.

Tip 1: Maximize Medical Allowance Exemption

FBR offers a 10% medical allowance exemption on your basic salary. This means 10% of your basic salary is tax-free.

Example:

• Monthly Salary:?Rs. 1,00,000
• Basic Salary:?Rs. 50,000 (Let's assume for this example)
• Medical Allowance Exemption:?10% of Rs. 50,000 = Rs. 5,000
• Taxable Salary:?Rs. 1,00,000 - Rs. 5,000 = Rs. 95,000

Action:

• Discuss with your employer the possibility of structuring your salary with a higher basic salary to maximize this exemption.

Tip 2: Utilize Fuel Cards Strategically

• Using a company-issued fuel card can potentially reduce your taxable income.
• Since the company pays for the fuel, the card value isn't included in your taxable salary.

Action:

• If your employer offers fuel cards, inquire about using them for official work purposes.

Tip 3: Manage Advance Tax Payments

• If you've paid advance tax during the year, you can claim a refund by informing your employer.

Example:

• Annual Tax Liability:?Rs. 15,000
• Advance Tax Paid:?Rs. 5,000
• Remaining Tax to be Deducted from Salary:?Rs. 15,000 - Rs. 5,000 = Rs. 10,000

Action:

• Provide proof of advance tax payment to your employer for them to adjust your monthly tax deductions (along with IT- Form 3).

Additional Points:

• Remember, these are suggestions. The actual impact on your taxes will depend on your specific situation.
• Tax slabs (tax brackets) can change, affecting your tax rate.
• Consult US for personalized advice.

By understanding these strategies and discussing them with your employer, you might be able to optimize your tax situation and potentially reduce your tax burden.

This article was published at Understanding Taxes on Income from Salary in Pakistan