Tax Planning Tips for Salaried Individuals

At the end of every financial year, many tax payers  make investments to minimize taxes, without adequate knowledge of the various available options. The Income Tax Act offers many more incentives and allowances, apart from the popular 80C, which could reduce tax liability substantially for the salaried individuals.  Here are some smart tips to help you save more and reduce taxes. Exemptions/reimbursements – Identify the reimbursements available from the company and take maximum advantage of the same. Normal expenses that one incurs could help save tax. Example- Telephone/fuel reimbursements, meal vouchers and company car. A person in lower tax slabs can reduce his tax liability to nil with exemptions alone. Some of the Popularly Known Exemptions/Reimbursements/Deductions     House Rent Allowance Minimum of – 1. Actual HRA 2. Rent Paid – 10% of Basic 3. 40a% of Basic (Non-Metros) or 50% of Basic (Metros) Conveyance Allowance Rs 800 / Month Leave Travel Allowance Use your Leave Travel Allowance for your holidays, which is available twice in a block of four years. In case you have been unable to claim the benefit in a particular four- year block, you could now carry forward one journey to the succeeding block and claim it in the first calendar year of that block. Thus, you may be eligible for three exemptions in that block . Medical Reimbursement Rs 15,000 / Annum Deductions Section 80C allows a maximum limit of Rs 1 lakh across investments ranging from provident fund, PPF, infrastructure bonds, fixed deposits (5 years or more), NSC, insurance/pension plans, unit linked insurance, equity linked savings scheme etc. It also includes tuition fees of your children and the repayment of principal on your housing loan. Use your home loan efficiently to save more tax. The principal component of your loan, is included under Section 80C, offering a deduction up to Rs. 1,00,000. The interest portion offers  separate a deduction up to Rs. 1,50,000 separately under Section 24. Medical premium upto a maximum of Rs 15,000 qualifies for deduction, with an additional Rs 15,000 for parents. Additional deduction of 20,000 could be availed in case of a senior citizen. You can claim a separate deduction for medical premium of your parents. A person who have spent money on the maintenance (including medical treatment) of dependant persons with disability, could avail deductions 80DD of the Act. Individuals paying interest on education loan should obtain the interest payment certificate under section 80E of the Act. Those who are suffering from not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 50,000/- and in case of severe disability to the extent of Rs. 100,000/- under section 80U of the Act. Tax on Bonus A bonus from your employer is fully taxable in the year in which you receive it. However request your employer for the following: If you anticipate tax rates to be reduced or slabs to be modified in the subsequent year, see if you could push the bonus payment to the subsequent year Produce your tax investment details well before, to prevent your employer from deducting tax on bonus before handing it over. To Conclude :  Keep in mind the below points, to avoid the hassles of last minute tax planning.  Give your employer details of loans and tax saving investments beforehand, to prevent any excess deduction. Check the Form 16 received at the end of each year from your employer thoroughly.  It is important to start your tax planning well before 31st March, and to file your returns before the 31st of July each year. Some Tax Planning Tips for Salaried Individuals. Tax season has started, please go here to file your tax return or call us at + 91 9038335433.