Are you earning a salary in handsome figures? Are you seeking ways to secure the tax amount this year ?In that case, there are two opportunities available for you.
A) Salary restructuring.
B) Tax saving tools.
- Salary Restructuring simply means reframing the structure of your salary, to reduce tax responsibilities.
- Check with your employer for any HRA as it is subtracted from your taxable income.
- Salary Restructuring also includes checking for allowances offered by your company on the expenses of your children. Claim the tax benefit Under Section 10(14).
- If you require to visit a doctor and avail medical reimbursements if any of Rs15,000.
- If your employer pays you the advance salary, try to get the relief under Section 89 (1).
- If you are eligible to get a pension and it is commutable, get tax relief under Section 89 (1). This pension is tax-free for government employees and partially exempted for others.
Though these tools help you to save tax, they have a minimum amount of Rs 1 lakhs. An individual whose income is above this limit attracts tax.
- Insurance: You can take tax benefits on all of the payments made by you on Health Insurance and Life Insurance. In this way, you can save about Rs15,000 and above the ceiling of Rs1 lakhs.
- PPF: One of the safest tax-saving tool available is the Public Provident Fund. Both the interest and capitals withdrawn from the funds are free from taxes. There is a lock in the period of 15 years.
- National Savings Certificate: Government tax saving schemes available in the post office, with a lock in the period of 5 years is known as NSC or Post office CTD accounts.
- Bank deposits: These are specific tax-saving FDs offered by banks with a lock-in period of 5 years.
- ELSS: A tax saving tool offered by mutual Funds with a lock in the period of 3 years is known as ELSS Mutual Funds. It can be used to invest in different quality stocks.
- There are other options available that are Housing Loans, Education Loans, and Donations.
Conclusion of Tax Saving tools:
- PPF, NSC is safe but offer considerably low returns.
- ELSS with short lock-in periods is risky.
- ULIPs carry risk factors without any benefits of liquidity.
While investing in these schemes, an individual must look into other factors such as risk appetite returns generated by these schemes, past performance, and liquidity.
Consider all of the points thoroughly before opting for any tax saving plans.