The financial year 2016-17 is about to end and many of us will be worried about the taxes we have to pay this time. Whether you are a fresher or an experienced one everyone want to pay less on taxes and want to save some amount. As, who want to pay more when you can save some amount legally. The tax imposed by our government is not only on one’s basic salary but it is also on the allowances which you get. As a result the tax deduction can affect your pocket and finances to a great extent.
11 Plus Ideas for Salaried Persons to Save Income Tax
- Use section 80C.
Under this section you can get a tax exemption up to INR 1.5 lakhs. Try to claim this total amount for tax deduction. Under this section you can avail the tax exemption if you invest in the following:
- Life Insurance Premium
- Home Loan Principal Repayment
- Senior Citizen Saving Scheme
- National Saving Certificate
- Kid’s Education Fees
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- Post Office Tax Saving Deposits
- Sukanaya Samriddhi Scheme
- Equity Linked Savings Scheme
- Claim tax benefits on your rent payments
Salaried person who lives in rented house can claim tax benefit on their HRA. There can be a fully or partial tax exemption on the HRA can. But if one don’t have a rented accommodation and still gets house rent allowance (HRA), In this case the allowance will be fully taxable. HRA tax exemption is also available if you live with your parents, as rents can be paid to them too. But your parents should include this rental income (given by you) in their tax return. You don’t have to worry if you couldn’t submit the rent receipts to your employer on time, claim your HRA exemption at the time you filing your tax returns. Keep the rent receipts safely and always maintain details of payments made for the rent.
- Your vacations bills can also help you to save.
You can save a part of your tax by submitting the bills of your vacation as on LTA (Leave Travel Allowance) some tax exemptions can be availed. This is applicable for the trip only within India. This LTA is not a mandatory benefit. It completely depends on your employer who decides your pay structure. If LTA is included in your pay structure you can avail this exemption otherwise it cannot be availed.
- Buy a medical insurance for your family and save on tax
You can buy a medical insurance plan for yourself, your spouse or for your children. By doing this you are not only securing your family’s and your health but you can get a tax exemption for this. On a health insurance of your family you can claim a tax deduction up to a maximum of INR 25,000 and if you buy a policy for your parent you can claim for a maximum of up to INR 30,000 deduction. This tax exemption comes under the section 80D. Even if you have not taken any policy till now it’s not too late. Take a policy now only and you can claim this for tax exemption this year only while the benefits of the policy can be availed from next year onwards which depends on the terms and condition of the policy.
- Under section 80E. (tax benefit on loan for higher education)
If anyone has taken a loan for his/her higher education than that person can avail a tax benefit. This loan has a tenure maximum of 8 years. So you can avail this tax benefit until you repay the loan.
- Interest Income from The Saving AccountS
Some of you might not be aware that one can save tax on the interest earned from the savings account, this can be done Under Section 80TTA/80TTB. The amount which can be saved is not up to ₹ 10,000.
One can also consider interest earned from the savings account in the post office and co-operative society to be claimed for the tax exemption.This exemption is higher in case of senior citizens, which is up to ₹ 50,000.
- Leave Encashment
If you have an option to encash you leaves then do so. You can get a tax exemption on your leaves up to maximum of 3 lakhs. Always keep in mind that the leave encashment in your working tenure is always taxable. Tax exemption can only be availed while retirement or resignation.
- Save on taxes through salary Restrictions
Many expenses in your life is because of your job. Such as wearing a particular dress at your job, traveling to different places frequently, reading many newspapers and magazine, talking on phone with people. All these expenses are because of your job, and most of the companies pay for this if your job profile need all these things. So there is no need to pay full tax on all these expenses. This expenses are non-taxable if you pay bills for all the expenses on your allowance.
Some of these allowances are:
- Newspaper, Books and Magazine
- Medical Treatment
- Personality Development
- Office Entertainment
- Telephone and mobile
Any allowance provided by your company can be applied for tax exemption up to a limit of 1,600/ month.
Also, gifts from the company, of up to Rs. 5,000 annually are tax-exempt.
There are many reimbursements which a company do to their employees. It can a travel reimbursement or it can be a medical reimbursement. These reimbursements are exempted from the taxes. So it’s important to claim these while you file your income tax returns.
- Low Income Rebate
In 2016 budget our government has provided a tax benefit to the people how have an income equal to or less than INR 5,00,000. Earlier a tax rebate of INR 2000 was provided to people who come under this income category but in this year budget it has been raised up to INR 5,000.
- Rajiv Gandhi Equity Saving Scheme
Rajiv Gandhi Equity Saving Scheme (RGESS) is also one of the savings scheme introduced by our government in year 2012. Under this scheme one can avail a deduction of Rs. 25,000 for investments made up to Rs. 50,000 . New investors having an income below Rs. 12 lakh can invest in this scheme and can avail the tax benefits. This scheme aims to encourage small investors in the domestic market place.
- National Pension Scheme
one can claim an additional tax deduction of Rs. 50,000 for an investments made in National Pension Scheme (NPS). This comes under the Section 80CCD. This section represents deduction with respect to the pension plan notified by the government of India, including NPS. In Addition to this employer’s contribution to NPS of up to 10% of their basic salary is tax exempted under Section 80CCD(2).
- Profit earned from Selling Shares/ Equity Mutual Funds
One can make their profits 100% non-taxable up to Rs. 1,00,000. when earned from selling shares and equity mutual funds.
- Money Received from Provident Fund
As we know one can save tax on investments in Provident Account in the year of investment done. However, apart from this, another important thing you need to know here is – you don’t have to pay taxes on interest received from EPF/PF investments.
Keep your Provident Fund active for a minimum of five years before you start withdrawing money. But this recommended doing only in case of emergency.