At the end of every fiscal year, most of the taxpayers try to make investments to minimize taxes without having any knowledge of different available options. Income Tax Act offers a different sort of incentive and allowances apart from Section 80 C that helps one in reducing tax liability, especially for salaried individuals.
Here are some of the tips that can help you to reduce and save more on taxes.
1. Salary Restructuring
Though restructuring the salary is not possible. Restructuring a few of the components can help one in reducing all tax liabilities.
Tips for Salary Restructuring:
- You must try to opt for food coupons instead of lunch allowance. These are exempted from the tax up to Rs 60,000 per year.
- Try to include medical allowance, transport allowance, education allowance, and telephone expenses as part of your salary. Try to give proofs for the actual expenses occurred to save tax.
- Choose a company car instead of using personal cars to reduce taxes.
2. Consuming Section 80 C:
Under Section 80 C, a person gets a maximum deduction of Rs 1 lakhs. One can utilize this section by investing in the options given below:
- PPF ( Public Provident Funds)
- ELSS( Equity Liked Savings Schemes)
- Five years of Fixed Deposits in Banks and post office.
3. Options beyond 80C
If a person has ended his tax limit of Rs 1 lakhs one can go for further options:
|Section 80 D||Under this section, a deduction of Rs 15,000 is available for the medical insurance of the spouse, children and a deduction of Rs 20,000 is available for medical insurance for parents above 65 years.|
|Section 80CCF||In addition to Rs 1 lakhs of Section 80 C, a deduction of Rs 20,000 is available for doing investments in Infrastructure Bonds.|
|Section 80G||Donations to NGO’s and charitable institutions|
4. Save Tax From Home Loans:
A person can use his Housing Loan to save on taxes. The principal component of the loan is involved in Section 80 C with a deduction of up to Rs 1 lakhs. Under Section 24, a person can get a deduction of Rs 1.5 lakhs from the interest portion.
5. Leave Travel Allowance:
One can use his LTA (Leave Travel Allowance) for your holidays. It is available twice in a block of 4 years. If a person fails to claim the benefit under these 4-year blocks, he is eligible for the three tax exemptions in that block.
6. Tax on Bonuses
A bonus that you get from your employer is fully taxable. Try to produce your investment details before, to prevent your employer from tax deductions on bonus.
Tips to avoid last-minute hassles of tax planning:
- Try to give the details of loans and tax saving schemes to the employer to prevent tax deductions.
- Check the Form 16 received thoroughly at the end of each year.
- It is very important to start planning your tax before March 31 and to file the taxes on time before July 31 of each year.