Tax planning is important as it helps in taking advantage of various tax deductions and exemptions to cut down the tax liability during a financial year. For a salaried employee, tax planning is a matter of planning and discipline. It is an essential part of the financial planning. Planning comprises of making a set of decisions at the start of the financial year and discipline comes in when it is required to stick to the plan. Tax planning of salaried employees is a strategic method of mixing ideal investments and optimum tax benefits. Below here are some tax saving tips for salaried employees that should keep them in decent place. These tips aids reduce the tax incidence and help achieve the financial targets.
- Claim tax deduction using Section 80C:Salaried employees are allowed to claim the tax deduction using Section 80C during a financial year. The tax liability can be reduced as there is a broad range of investment options that will help claim the tax deduction under section 80C. Salaried employees can invest in life insurance policies such as term insurance, child plan, ULIPs, pension plan, etc. For investments in the Employees’ Provident Fund, Public Provident Fund, Sukanya Samriddhi Account, National Pension Scheme, Post Office Senior Citizen Savings Scheme, etc., Section 80C allows for the tax deduction. Also some expenses like the tuition fees for children and home loan re-payment are permitted to get the tax deduction under Section 80C. All these investments guarantee potential yields along with tax benefits up to an aggregate limit of Rs.1.5 lakhs under Section 80C.
- Purchase a medical cover to get tax deduction under Section 80D:Tax deduction can be claimed for buying medical insurance. The premiums paid against the health insurance for children, spouse, parents and for the individuals themselves are eligible for tax deductions under Section 80D of Income Tax Act. Health insurance premium of Rs.25,000 can be claimed for self and family (below 60 years). For non-senior parents, an additional deduction of Rs.25,000 can be availed. And for senior citizens (family and parents), tax deduction up to Rs.30,000 can be availed.
- Claim tax deduction under Section 24(B):Home loan interest component up to Rs.2 lakh in case of self-occupied house is allowed as tax deduction under Section 24(B). And if the property is a let-out one, then the entire interest amount can be claimed as tax deduction.
- Check for allowances given by the employer to seek tax exemption:Some expenses such as travel expenses for going to the office, expenses for uniform, for entertainment of existing or would-be clients, etc. should not be a part of an individual’s income and thus are considered as non-taxable. Tax deduction can be availed for the professional tax paid for the income earned by salary. House rent allowance (HRA), if received as a part of your salary can be claimed for tax deduction, subject to the limit specified. Tax deduction can also be availed for Conveyance allowance up to Rs.1,600 per month. Blind and handicapped employees can avail the tax exemption up to Rs.3,200 per month. For Telephone reimbursement allowance, if the job requires to call the clients, the employer reimburses the bill amount which can also be claimed for tax exemption under the rules of 3(7)(ix) of Income Tax Act.Therefore, a proper tax planning helps reduce the tax burden. Choosing an appropriate investment options is important, that will help in tax saving along with high returns from that investment.