As an earning member of your family, a majority of your income might be spent in covering expenses. These may be household expenses, medical expenses and education-related expenses if you have any children. Whatever amount you are left with will either be saved or invested. However, your income and your investments are bound to be taxed by the authorities.
There are ways, however, by which you can take advantage and save tax on your income. A tax-saving plan can not only help you save money by making smart choices, but also help you implement the habit of understanding the importance of tax-filing and tax-saving at the same time. Keep reading to know what tax-saving tips you can take advantage of.
Tax-saving tips for your income
Include these tips in your tax-saving plan:
- Understand the breakdown of your salary
As a salaried individual, a simple look at the breakdown of your salary slip can help you evaluate and take advantage of those salary components which help maximise tax benefits. For example, if you are living in a rented accommodation, you can opt for House Rent Allowance (HRA). Under Section 10(13A) of the Income tax act, you can claim tax exemption on your HRA. Similarly, if you have children who are in school, you can claim tax deduction under Section 10(14) for the education allowance offered by the employer. Other components also include telephone and internet allowance, food coupons, etc. You can contact your tax advisor to know more about this.
- Opt for tax-saving instruments
As a salaried employee, you can take advantage of many financial instruments which encourage savings. The government has provided certain Tax Deductions on the amounts invested in specified instruments under section 80C of the Income-tax Act. The financial instruments that you can take full advantage of are the employee provident fund (EPF), public provident fund (PPF) and national pension scheme (NPS). You can also go for investments into mutual funds, ELSS and ULIPs, to enjoy tax benefits. Get in touch with a tax advisor to know the changes from old tax regime to the new tax regime with regards to these instruments.
- Do not delay filing of tax-returns
Tax-filing season can be hectic and rushing for everyone. Getting the documents in order and getting all the details right can be meticulous. However, the importance of filing income tax returns within the stipulated time period cannot be overstated. Not only does it assist in setting up a record in relation to your tax filing for scrutiny by the tax authorities, it also helps you in the future. If you are applying for immigration documents or for a loan, your documents related to income tax returns are a pre-requisite by the respective authorities.
- Go for an insurance policy
When you invest in an insurance policy, you get to enjoy tax benefits on the premiums paid towards it. The policy could be either for you or for you and your family, such as a health insurance policy. The tax deductions on health insurance are: Rs. 25,000 for self, spouse and dependent children, and Rs. 50,000 for senior citizen parents. Senior citizens can claim a benefit of up to Rs. 50,000 for medical expenses if they are not covered by health insurance.
Similarly, if you are investing in an insurance policy for your family, i.e., life insurance, you can claim tax deductions of up to Rs. 1.5 Lakhs on the premium for policies bought before 31st March 2012. For policies purchased after 1st April 2012, tax deductions can be claimed if the premium is 10% of the sum assured. Under Section 10(10D) of the Income tax act, the sum assured amount is also tax deductible.
Conclusion
These are some of the tax-saving tips you can take advantage of in relation to your income. To know more about it and other such tips, you can get in touch with your tax advisor. If you wish to know how much tax would be applied on your investments, you can use the income tax calculator to get an estimate.
The post Are you a salaried individual? Here are some tax-saving tips for you first appeared on InfoBeat.com.
