Salaried employees tend to make investments near the end of every financial year in order to minimize taxes. However, there are other options available as well that can be helpful in saving tax. Enlisted below are some useful tax saving tips for salaried employees in India that you may find helpful:
Though it is not an always available option, however, if your organization permits, it is one of the best ways to save tax. You just need
to restructure a few components to bring down your tax liability. For instance: include transport, medical, education and other such allowances as a part of your salary and then to reduce tax, produce bills of actual expenses incurred for the respective allowances; opt for food coupons instead of lunch allowance as food coupons are exempt from tax up to Rs. 50 per meal; to decrease prerequisite taxation, opt for company car rather than making use of your own; etc.
With Section 80C, you can reduce your tax liability by up to INR 1 Lac. You can make the most from this sector by choosing to invest in any of the available option, such as Life Insurance Premium, 5 year fixed deposit with post office and banks, Equity Linked Saving Scheme, Public Provident Fund, National Savings Certificate, tuition fees paid for the education of your children (maximum 2), etc.
Tax Savings from Home Loans
You can save tax with your Home Loan. Tax can be reduced by up to INR 1 Lac, from the principal amount of your loan, under the Section 80C. On the other hand, under Section 24, up to INR 1.5 Lacs can be deducted from the interest portion of your Home Loan.
House Rent Allowance
As per the Section 80GG, you can reduce tax liability by receiving House Rent Allowance from your company. One can claim INR 2,000 per month/ 25% of their total income/ excess of rent paid over 10% of total salary under this section. However, if your spouse or minor child owns a residential accommodation in the region where you live/ perform office duties, you will not be allowed this deduction. You can available exemption in the following three if House Rent Allowance is a part of your income: the HRA received from the employer; 40% and 50% of your basic salary for non-metro and metro, respectively; and rent paid by you for the accommodation (minus 10% of your income).
Leave Travel Allowance
Make use of your Travel Leave Allowance while planning vacations as they are available twice in a period of 4 years. However, in case you have not been able to claim this benefit in that 4 year period, you can carry it forward to one succeeding year which means in the coming 4 year period you become eligible for 3 exemptions.
Options Beyond 80C
If you have fully utilized the Section 80C tax exemption limit of INR 1 Lac, you can explore a few more option for further tax savings. For instance, under Section 80G, donations to charitable institutions or specified funds are exempted. Moreover, under Section 80D, you can avail tax deduction of INR 15, 000 for the medical insurance of self, spouse and dependent children. This section also permits tax exemption of INR 20,000 for medical insurance of parents above the age of 65 years.
Make sure you do not get stuck in the last minute tax planning hassle. Provide your employer with details of your tax saving investments and loans beforehand. Also, carefully go through the Form 16 given by your employer at the end of each year.