Don't Let Your hard earned money Slip Away!!
You and me, everyone want to save tax. You must be knowing some ways of tax saving. But still there is scope. Rather, you can always find some extra methods to reduce the tax outgo. Do you want to know the 10 most effective ways to save tax? You must read on this post to save thousands of rupees. This articles is specially written for salaried people.
1. Save Tax On Rent Payment
We get a job in a different city or place. We go there to do our job. If the company does not give us accommodation we have to rent out. We live in rented house because of our job. Therefore, expense of rent should be deducted from the taxable income.
Employers do give some part of your remuneration as House Rent Allowance (HRA). You subtract this HRA from your gross income. However, you cannot take full benefit of HRA for tax saving. There is a formula for the HRA tax benefit.You can deduct the lowest of these from gross income.Employers do give some part of your remuneration as House Rent Allowance (HRA). You subtract this HRA from your gross income. However, you cannot take full benefit of HRA for tax saving. There is a formula for the HRA tax benefit.You can deduct the lowest of these from gross income.
- Actual HRA given by the employer
- 50% of the basic salary plus DA if the employee is situated in Delhi, Mumbai, Kolkata and Chennai. Else, 40% of the basic salary plus DA.
- Actual house rent paid by you, minus 10% of basic salary+DA.
You can also use a HRA calculator to find out the HRA tax benefit.HRA gives you big tax saving. Ask your employer to keep the provision of HRA in your salary structure.Also, Don’t forget to take rent receipts from your house owner. If your total rent of a financial year exceeds 1 lakh then you need to give copies of registered lease agreement and copy of the homeowner’s PAN card.(Note: Claiming bogus rent payment and rent payment to your family member may lead you to serious litigations)
2. Analysing the Pay Structure for Tax Saving Opportunity
One important thing to consider before you jump invest in tax
saving investment options for reducing your tax dues is to review your pay
structure and your household expenses first. Your salary may comprise of
several allowances and perquisites like Leave Travel Allowance (LTA), House
Rent Allowance (HRA), Medical Reimbursement, Uniform Allowance,
Car Reimbursement, Telephone Reimbursement, Books and Periodicals, etc which
may be claimed as tax exempt subject to submission of related proofs. But most
of the employers stop accepting the related proofs towards the end of January.
So now you may not be able to claim all these exemptions, but you can still
claim few of them while filing your tax return to reduce the tax burden, e.g.,
HRA.
3. Leave Travel Allowances and Medical Expense
Some personal expenses are also eligible for exemptions. These Expenses are deducted from your gross salary. Your employer may give you part of your salary as medical allowance. Check with the HR department.
If you produce an actual bill of medical expenses, this allowance becomes tax-free. So, Start collecting medical bills. However, it is limited to Rs 15,000 in a financial year. You can give receipts of medical expense of your dependents as well.
Your employer can give you leave travel allowance as well. You are entitled to tax-free leave travel allowance.
- It is also limited to two times in a block of 4 years.
- The travel should occur while you are on the leave.
- It should be within India.
- Travel should be from the shortest route.
- You can claim the maximum for AC-I of the train journey and economy class of air travel.
4. Invest And Reduce Taxable Income
Certain investments give you tax rebate. These investments come under section 80C deductions. The amount invested is deducted from your taxable income.
Many of such investments come under EEE category. It means you need not to give tax at the time of investment, earning and redemption. However, There is a maximum limit for 80C deductions 1.5 lakhs .
5. Expenses Eligible For Tax Saving
There are some expenses which also give a deduction for tax saving. These expenses are also counted under the limit of 80C.
- Tuition fees for self and children
- Insurance scheme premium
- Home loan principal payment- Home loan EMI has two-part, principal and interest. Principal part gives tax saving benefit under section 80C. Know more about the tax benefit of home loan
These expenses and above mentioned investment in aggregate should not exceed 1.5 lakh limit.
6.Medical Insurance Deduction
Medical Insurance expense gives you the deduction, over and above the 1.5 lakh limit. You can save tax for the health insurance premium of your family and dependent parents. Also, health checkup can also give you tax saving. You can deduce these expenses from your total taxable income.
- Up to Rs 25,000 for the health insurance of self and family. You can also include health checkups of up to Rs 5,000 within this limit.
- Up to Rs 25,000 for the health insurance of parents. If they are above 60 years, This limit goes up to 30,000.
7. Enjoy Tax Benefit On Home Loan Interest Payment
Home loan interest payment enjoys separate tax saving. The limit of deduction for home loan interest payment is ₹2.0 lacs. This deduction can give you a very big tax saving. However, the loan amount should be big to get the full benefit. You can also double your tax saving through the joint home loan.
8. Set Off Capital Gain, Save Tax
Salaried people need to give capital gains tax on their investments. Shares attract only short-term capital gains tax while property and gold attract both short and long term capital gains taxes. However, you can set off your capital gains from an investment with the capital loss of another investment. Note, you can set off short-term capital gain only with short-term capital loss and long term capital gain with long term capital loss only.
You can also carry forward your capital loss up to 8 years. This will give a fairly good chance of tax saving on account of capital loss. Suppose you incur trading loss in shares. This loss can be carried forward up to seven years. In subsequent years your trading profit can be set off with this big loss.
9. Giving Away Money For Charity? Why Pay Taxes
You can save tax on your donations. However, not every charity gives you 100% tax saving. Donations to the PM relief fund, some notified NGO and political parties can give you the 100% tax benefit. You can also donate to scientific institutions and religious body and claim tax rebate.
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