When it comes to pay tax do you get these questions in your mind you feel that you are paying excess tax? Do you think that you can save tax? Your tax planning is proper? These are certain steps to follow to save tax.
1. Revise salary and save tax
When you are in job you face many small expenses, which you are required to make. It include your traveling expenses, your expenditure on entertaining clients, study material like books, journals that you need to buy to keep yourself well-informed. These are all part of those expenses that you are forced to do. Therefore you need extra money besides salary to fulfill your requirements.
2. 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.
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.
4. Invest And Reduce Taxable Income
Certain investments give your tax rebate. These investments come under section 80C of 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.
List of Investments Which Saves Tax
Contribution to EPF account
Employee Provident Fund is a retirement saving instrument. Contribution to the EPF is mandatory for the employees of organized sector if their bic salary is less than Rs 15000/month.
he employer also contributes equal amount in the EPF account of employee. The contribution to EPF by employer is tax exempt, while contribution by the employee is tax deductible under section 80C.
Deposit in PPF account
PPF account is also a long term saving scheme by the government. Anyone can open the PPF account in SBI, post office or other banks. The PPF account gives tax deduction under section 80C.
Investments in tax saving mutual funds i. e. Equity Linked Saving Scheme (ELSS)
Equity linked saving scheme are diversified mutual fund scheme which have lock-in period of 3 years. The ELSS invests in share market. It has potential of highest return.
Sukanya Samriddhi Account
This is a government saving scheme for the girl child. It gives highest return among all the small saving schemes. The investment is locked till your girl child turns 18. The investment and maturity amount is tax-free.
Tax Saving Fixed Deposit
Tax saving Fixed deposit is like any other fixed deposit of bank. The only difference is the lock in period of 5 years. The interest earning of tax saving FD is subject to tax.
National Saving Certificate (NSC)
It is post office small saving scheme. The national saving certificate is issued for 5 years. The interest rate of this scheme is 8.5%. the NSC gives tax benefit under section 80C. The interest is subject to tax.
Senior Citizen Saving Scheme
This is also an small saving scheme by the government. It is designed for senior citizens. This scheme gives regular income. The interest rate of senior citizen saving scheme is better than NSC or PPF. The retired defence personnel can subscribe this scheme at any age.
There are some expenses which also give a deduction for tax saving.
5. Expenses Eligible For Tax Saving
Under the limit of 1.5 lakh deduction there are some expenses as well.
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. 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.
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 increased to 2.5 lakhs in the budget 2016. 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 gain 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.
10. On Time Tax Declarations And Investments
Practically, this is the most important tip of tax Saving. Employers need to pay advance tax every quarter. Therefore, they deduct TDS every month from your salary. The TDS is deducted according to your projected tax liability for that financial year.
If you don’t declare your planned tax saving, investment and expenses of the year, the projected tax will be higher. Accordingly, the employer would start deducting TDS every month for the first quarter of the financial year. It may happen that when you declare all of your tax saving instruments, It has become very late. The company may have cut more TDS than required. Of course you can claim tax refund while filing income tax return, but for the time being you pay extra taxes. So, give a tax declaration at the beginning of the year.
By: GCL SECURITIES
Article Directory: http://www.articlecatalog.com
Copy and Paste Link Code:
Read other Articles from GCL SECURITIES:
Article ID 1044600 (Views 80)