10 Tips To Save Money From Taxes
At the end of every financial year, many taxpayers anxiously make investments to reduce taxes, without sufficient knowledge of the various available choices. There is 10 Tips To Save Money From Taxes, which we don’t know. The Income Tax Act offers various incentives and allowances which could reduce tax liability substantially for the salaried individuals. Here are 10 Tips To Save Money From Taxes:
10 Tips To Save Money From Taxes
- Salary Restructuring
Restructuring your salary may not always be possible. But if your company permits, or if you are on good terms with your HR department, restructuring a few components could reduce your tax liability. Here are some of the safe components of your salary structure which can minimize your tax burden and help you plan your Salary Structure
- Opt for food coupons instead of lunch allowances, as they are exempt from tax up to Rs. 50 per meal
- Include medical allowance, transport allowance, education allowance, uniform expenses (if any), and telephone expenses as part of salary. Produce bills of actual expenses incurred for these allowances to reduce tax
- Opt for the company car instead of using your own car, to reduce high prerequisite taxation
- Leave Travel Allowance (LTA) is one of best Tax saving tools available to employees. As per the Rules, you can claim the LTA benefit only twice during the block of 4 years. For this purpose, following condition should be satisfied:
- You should travel anywhere in India.
- Travel should be from the shortest route.
- It is also limited to two times in a block of 4 years.
- You can claim the maximum for AC-I of the train journey and economy class of air travel.
- Income Tax saving on House Rent Allowance (HRA)
House Rent Allowance (HRA) is best tax saving tools available to employees. With these you can save upto 50% of your salary if you reside in Metro (40% of your salary if you reside in non-metro). As per income Tax act, for calculation House rent allowance least of the following is available as deduction:
- Actual HRA received
- 50% / 40%(metro / non-metro) of basic ‘salary’
- Rent paid minus 10% of basic salary.Leave Travel Allowances
- 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 are Contribution to EPF, Deposit in PPF account, National Saving Certificate (NSC) and others.
- Medical Insurance Deduction
Your expense of medical insurance can give you the opportunity to save tax. Under section 80D of the income tax act, you can get the tax benefit for the insurance premium. You can get a tax deduction of up to Rs 65,000 under the section 80D. Like any other tax saving option, there are some limitations with section 80D.
- Expenses Eligible for Tax Saving
Under the limit of 1.5 lakh deduction there are some expenses as well.
- 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
- Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India
- 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. But, the loan amount has to be big to get the total benefit. The joint home loan is a very good method to double your tax saving
- Set off Capital Gain
You cannot avoid tax on short-term capital gains. However, you can claim deductions to lower the tax liability on long-term gains.Buying a house is a popular investment option. Long-term capital gains from selling a house get tax exemption if they are invested in buying or building a new house. The new house has to be bought one year before the transfer of the first house or within two years after the sale. The deduction allowed is equal to the actual investment or the capital gain, whichever is lower.
If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. When you buy a plot to build a house, the cost of land is included in the construction cost. Even buying an under-construction property entitles you to tax deduction.
- Boost your retirement savings.
Voluntarily lowering your take-home paycheck by upping your retirement contributions might be painful in the short-term, but it offers two benefits. First, you beef up your retirement savings, and second, you lower your tax burden. Money funneled into certain types of retirement accounts, including 401(k)s and IRAs, is tax deductible, within limits.
- Giving Away Money for Charity
Donating money to charitable organizations or trusts allow you to get exemption. 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. Donations to institutions engaged in scientific research or rural development qualify for deductions and claim tax rebate.
Hope the above 10 Tips To Save Money From Taxes will give you a basic idea of tax saving ways. Share your opinion about tax saving methods by putting your comment below.
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