Saturday, February 10, 2018

5 Ways to Save Tax for Salaried Employees

tax benefits
It is the duty of every citizen of India to pay taxes. As a diligent taxpayer, it is imperative to know about the various deductions and exemptions allowed under various sections of the Income Tax Act, 1961. Besides, there are numerous other methods to reduce your tax liability largely.

Following are five most popular and common ways to save tax for salaried employees in India.

1. Submit medical bills to your employer on time

Most salaried individuals are eligible to receive medical reimbursement of INR 15000 as part of their Cost ToCompany (CTC). Therefore, you may claim a tax deduction for all your medical expenses up to this amount. For this purpose, you may submit all your medical bills, medical reports, lab test bills, or doctor’s consultation bills to your employer. It is important to note that such a tax benefit may be claimed only through your employer, and hence you may submit such bills to your employer on a timely basis.

2. Save tax through House Rent Allowance

House Rent Allowance (HRA) is a common component for many salaried individuals. The rules of tax deduction on HRA are stated in Section 10 (13A), Income Tax Act. The amount that may be claimed as exemption is a minimum of –

a) Actual HRA amount received
b) 50% of the salary in case you live in a metropolitan city or 40% for a non-metropolitan region
c) Excess of rent paid annually above 10% of your salary.

In order to claim deductions on House Rent Allowance, you may submit rent receipts to your employer.

3. Claim deductions under Section 10(14)

The good news for salaried individuals is that they may avail of numerous deductions as per Section 10(14) of the Income Tax Act. You may avail of deduction on children’s education allowance up to a maximum amount of INR 100 a month, per child, up to two children. Besides, you may seek deduction on hostel expenditure allowance of INR 300 a month per child up to two children. You may also claim an exemption on helper or assistant allowance as well as uniform allowance up to the amount of expenses incurred.

4. Invest in medical insurance

You may claim health insurance tax benefits on your health plan. A medical insurance plan is indeed an integral part of financial planning. Besides providing a great degree of financial security during a medical contingency, it also provides tax benefits. You may seek health insurance tax benefits on the premium paid towards your policy. You may claim health insurance tax exemptions on premiums paid for yourself, spouse, parents, and dependent children. According to Section 80D, medical insurancepremiums are exempted up to a maximum of INR 25000. In an event that you or any of the covered members are senior citizens, you may enjoy a higher limit of INR 30000. You may, therefore, avail of such health insurance tax exemptions and reduce your tax liability.

5. Maximize utilization under Section 80C

Section 80C of the Income Tax Act allows a maximum deduction of INR 1.5 lakh. You may claim a deduction on investments made in various financial vehicles such as Public Provident Fund (PPF), Unit-Linked Insurance Plans (ULIPs),National Savings Certificate (NSC), andEquity-Linked Savings Scheme, among others. You may also avail of this section to reduce your taxable income through premiums paid on life insurance plans. Besides, you may claim deductions on tuition fees paid for the education of two children.

The Income Tax Act allows for numerous such deductions and exemptions for salaried individuals. You may, therefore, avail of health insurance tax exemption, numerous investment vehicles, and HRA component of your salary, among numerous others. You may take advantage of them and lower the amount paid towards income tax.

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