How to save tax before 31st March [For AY 2018-19]
An advertisement of Morgan Stanley once said “You must pay taxes but there’s no law that says you gotta leave a tip”. This advertisement aptly identifies that people are poor at tax planning. And as you are aware that 31st March is arriving, so we have decided to enlighten you on some basics of tax planning to reduce your tax burden and also to set and achieve your Financial Goals.
Often, investment for most individuals begins and ends with tax planning. And we are pretty much sure that you have also done investments only to save some tax. Although it is pertinent to avail tax breaks, this should not be the sole focus. You should always start by jotting down your key financial goals, the tentative time of money requirement and the corpus needed to achieve those goals. If tax saving investments are done with precise planning, it can help you in achieving your financial goals. For example, you can take a children’s plan that also provides tax benefit, you can take into account funds needed for contingency, considering the impact of inflation on your needs.
After your first few working years, as income goes up, it is always wise to invest beyond just tax saving investments to achieve your goals.
To start with, we can identify the details of allowances which are available from our company from our offer letter.
We have given below a brief details on some of the popular allowances / Exemptions and deductions, benefit of which can be availed by the salaried taxpayers to reduce their tax burden
#1 House Rent Allowance – Least of the following is deductible from your salary to claim HRA :-
- Actual HRA Received
- 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)
- Rent paid minus 10% of salary ( Wherein Salary = Basic + Dearness Allowance).
#2. Children Education Allowance – Up to ₹ 100 per month per child up to a maximum of 2 children is exempt.
#3. Hostel Expenditure Allowance – Up to ₹ 300 per month per child up to a maximum of 2 children is exempt.
#4. Transport Allowance is granted to an employee to meet expenditure on commuting between place of residence and place of duty – Up to ₹ 1,600 per month (₹ 3,200 per month for blind, deaf, dumb and handicapped employees) is exempt.
#5. Telephone/fuel reimbursements and meal vouchers to the extent expense incurred..
#6. Generally Leave Travel Allowance (LTA) is part of our salary component and if leave is availed and expense claim details not provided to company, Entire LTA becomes taxable but same can be allowed as deduction if proof of expenditure incurred on Travel is submitted to your company in prescribed format to the extent of LTA component in salary.
#7. Medical expenses incurred limited to ₹ 15,000 per year is non-taxable.
#8. Expenses incurred for health checkup upto ₹ 5000 per year deductible for self and dependable.
#9. Investment in PF / PPF / Infra Bonds / FD for 5 years / Sukanya Samridhi Scheme / NSC / Insurance plans / Pension Plans / Unit linked insurance / ELSS / Tution fees of Children / Repayment of Principal of Housing Loan are allowed as deduction to the extent of ₹ 1.50 lac.
#10. Donations made to certain Trusts or Institution are eligible for 100% tax deductions.
#11. Professional Tax is allowed as deduction to the extent of amount paid.
So you still have 2 months left to save your tax so below are some Investments that can help you out to Save Tax if Still not done…!!
- Investment in Life Insurance Policy with various plans available
- Investment in Equity Linked Savings Scheme through SIP’s or one time premium plans
- Investment in National Savings Certificate
- Five-year Bank Fixed Deposits
- Unit linked Insurance Plans
- Contributions to National Pension System can be allowed as deduction to extent of ₹ 50,000 in addition to deduction under Sec 80C.