Tax Saving Tips for Salaried Person
Tax Saving Tips for Salaried Employees
Tax Saving Tips for Salaried Employees in India
Earning money is not an easy task. With so much of competition around, never-ending workload and sky-high levels of stress, a person has to really slog hard to get his salary at the end of the month. Quite understandably, it pinches us to part with that hard earned money in the form of taxes! It therefore becomes important to be aware of various tax saving tips so that a salaried employee can claim tax exemptions at the end of the year. If you too are looking for some good tax saving tips, take a look at the points mentioned below.
Make use of Section 80C and save a lot of tax. Under section 80C, you can currently get a total tax exemption of up to Rs Rs.1.5 lac. To avail this benefit, you gave to invest in one (or more) of the following:
- A life insurance policy
- A Fixed Deposit with a minimum tenure of 5 years
- National Savings Certificate
- ULIP (Unit Linked Insurance Plan)
- Pension Plans
- ELSS (Equity Linked Savings Schemes) Mutual Funds
The tuition fees paid for your children’s education will also become tax free under section 80C.
Under section 80D, you are entitled to get tax exemptions if you invest in a health insurance policy for yourself or dependants such as your spouse, children and parents. So get a good Mediclaim policy that will not only keep you protected, but will also help you save tax.
Medical bills up to Rs 15,000 are also eligible for exemption under section 80D.
House Rent Allowance (HRA)
If you rent a house, you can save a lot of tax by utilising your HRA. If you reside in a metro city, you can get a tax deduction of up to 50% on your basic salary and 40% if you live in a non-metro city. However, you will qualify for this exemption only if the rent you paid is over 10% of your basic salary.
Taking a loan to buy a house not only allows you to own your dream abode, it also allows you to claim tax exemptions. The principal of the home loan is eligible for a maximum of Rs.1.5 lakh deduction under Section 80C while the interest component can get you a deduction of up to Rs. 2 lakhs under Section 24. However, the 80C exemption limit of Rs 1.5 lakhs is the sum total of all your tax saving investments (PPF, KVP, ELSS etc). Home loans also feature a further exemption of up to Rs. 1 Lakhs under section 80EE, which is applicable only to individuals.
A salaried person can also save on tax by getting his or salary restructured. To do this, you have to speak to your company HR and get a few changes made. Some of the ways in which you can restructure your salary and save on tax are:
- Get expenses like medical , conveyance, telephone bills, s uniform expenses (if any) to become a part of your salary. Produce the relevant bills at the end of each month and you will automatically end up saving a lot of tax.
- Replace the lunch allowance with some food vouchers (Sodexo, Ticket Restaurant, etc).
- Ask the company to buy you a car, instead of buying the car yourself. This will reduce your taxable income and help you save tax.
So as you can see, there are numerous ways in which you can save tax with a little planning and foresight. You just have to be wise about your investments. You also have to be methodical and disciplined financially to derive the maximum benefits from these tax saving methods.