While investing more amount for tax saving Consider the impact of inflation on your needs. After your first few working years, as income goes up, it is wise to invest beyond one’s tax saving investments to achieve your goals. Also, evaluate the life cover requirement, while planning for your taxes. We are giving below a brief on some of the Popular allowance / Exemption and deductions, benefit of which can be taken by the salaried taxpayers to reduce their tax burden.
Maximising your tax saving
1. Exemptions/reimbursements – Identify the reimbursements available from the company and take maximum advantage of the same. Normal expenses that one incurs could help save tax. Example- Telephone/fuel reimbursements, meal vouchers and company car. A person in lower tax slabs can reduce his tax liability to nil with exemptions alone.
Similarly, salaried employees staying in rented apartments can claim exemption under Section 10(5) of the Act in respect of house rent allowance by making the HRA a component of there salary.
Some of The Popularly Known Exemptions/Reimbursements
House Rent Allowance
Minimum of –
1. Actual HRA
2. Rent Paid – 10% of Basic
3. 40a% of Basic (Non-Metros) or 50% of Basic (Metros)
Rs 800 / Month
Leave Travel Allowance
Two trips in a block of 4 Yrs Amount not exceeding Air Economy or Rail AC I Fare shall be for shortest distance and for a single destination
Rs 15,000 / Annum
Section 80C allows a maximum limit of Rs 1 lakh across investments ranging from provident fund, PPF, infrastructure bonds, fixed deposits (5 years or more), NSC, insurance/pension plans, unit linked insurance, equity linked savings scheme etc. It also includes tuition fees of your children and the repayment of principal on your housing loan.
The interest component on your home loan has a separate limit of Rs 1.5 lakh.
Medical premia upto a maximum of Rs 15,000 qualifies for deduction, with an additional Rs 15,000 for parents. Additional deduction of 20,000 could be availed in case of a senior citizen.You can claim a separate deduction for medical premium of your parents.
A person who have spent money on the maintenance (including medical treatment) of dependant persons with disability, could avail deductions 80DD of the Act.
Individuals paying interest on education loan should obtain the interest payment certificate under section 80E of the Act.
Those who are suffering from not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 50,000/- and in case of severe disability to the extent of Rs. 100,000/- under section 80U of the Act.