Best Ways Salaried Professionals Can Save Taxes

Chennai: Most often it is seen that by the end of every financial year tax payers make their investment in a hurry in order to minimize their taxes, without even having adequate knowledge of various options. Tax planning is actually easy for salaried persons when compared to self employed or businessmen. But, the salaried class often neglects to do needed tax planning, and ends up spending their hard earned money.

One reason behind this negligence is lack of sufficient time to conduct the tax-planning exercise, or lack of awareness about different incentives, allowances and rebates under the Income Tax Act. There are various other sections apart from the Section 80C deductions which are quite popular, and can help salaried individuals save their taxes.

Here are some ways to save tax from your salary:

Restructuring your salary

If you want to reduce your tax try to get your salary restructured, yes it is sometimes not that easy but including certain components can benefit you by reducing the tax liability. When compared to other eligible investments restructuring the salary is a more safe and efficient means of claiming tax benefits. Some of the expenses that are included in saving tax are medical expenses, food coupons for instance Sodexo, transport allowance, House rent allowance and leave travel allowance.

Utilize deductions under Section 80C

Maximum deduction available under Section 80C is Rs 100,000 per annum. Thus if your salary is equal to or more than Rs 250,000 then you should utilize the entire 100,000 limit. If suppose an individual gets salary of about 600,000 and he only utilizes half of 100,000 then he will have to pay 15,450 as additional tax. Thus try to utilize the entire limit.

Few investments that are qualified under Section 80C are life insurance premium, public provident fund, equity linked savings scheme, national saving certificate, fixed deposits with banks or post office for five years etc.

Try to think beyond Section 80C

For individuals whose gross salary is beyond 250,000 per annum, for them the tax deductions will be even more thus deductions under Section 80C will not be sufficient in such case. During such situations go for some more options for instance opting for home loans where the interest payments will be around 150,000, medical insurance for spouse and dependent children  where the deduction will be up to 150,000 and if for senior citizen parents then the deduction will be up to 200,000 and donations to specified institutes or funds.

House Rent Allowance (HRA)

This can be one of the key factors that will reduce your tax burden to a major extent. Available exemptions will be for instance minimum amount from actual HRA; rent paid will be 10 percent of your basic salary. You can take benefit of this section even if you are not staying in a rented house for instance if you are staying with your parents or grandparents then you can pay rent to your parents as they don’t have any income source and claim HRA benefit.

Take Home loans

Home loans can help you save your tax efficiently. First inform your employer about the home loan and when you get Form 16 ensure that the interest you pay will be according to the loss shown in House property. The principal component of your loan, is included under Section 80C, which will offer you a of  1,00,000.  In addition to that the interest portion offers a deduction of  1,50,000 separately under Section 24.

Save tax on bonus

If you get bonus from your employer then that is fully taxable in the respective year. In case if you want tax reductions for next year then request your employer to push your bonus to next year. In addition to that provide your employer with all the needed tax investments detail in order to prevent tax reduction.

Leave Travel Allowance

Ensure to use Leave Travel Allowance for your holidays, which is available twice in a block of every four years. But in case if you have been unable to claim the benefit in a particular four- year block, then you could now carry forward one journey to the succeeding blocks and claims it in the first calendar year of that block. Thus, this will help you with the eligibility for three exemptions in that block.