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Category: Tax Planning

Ways to ease your Tax Burden

Effective Tax-Saving Strategies for Salaried Individuals

As the financial year comes to a close, the word 'tax' can be a source of stress for many earning individuals. However, there are legal ways to minimize your income tax burden, especially if you're a salaried person.

 

Tax Deductions under Section 80C, 80CCC, and 80CCD:

    • By exploring deductions under Sections 80C, 80CCC, and 80CCD, you can claim a maximum deduction of Rs. 1,50,000.
    • Invest in options such as PPF, five-year tax-saving Fixed Deposits, Pension Plans, Life Insurance Policies, Employees Provident Fund (EPF), or National Savings Certificates (NSC).

Tax Savings with Health Insurance Claims:

    • Utilize sections 80D, 80DD, and 80DDB to claim deductions for medical expenses for yourself, spouse, children, or disabled dependents, including treatment for specific diseases.

Home Loan-Related Tax Benefits:

    • Claim tax deductions on home loan principal repayment under Section 80C and interest paid under Section 24.
    • If you've taken an education loan, you can claim deductions under Section 80E for the interest portion.

Additional Deductions:

    • If your annual income is below Rs. 12 lakh and you're a first-time investor in shares or mutual funds, consider Section 80CCG for an additional deduction.
    • Long-term capital gains can be claimed for individuals who have invested in shares or mutual funds for more than three years.
    • Donations made to charitable trusts are tax-free, and deductions can be claimed under Section 80G.

Ways to Reduce Taxes through Legal Methods:

  • Reduce your tax liability legally by planning ahead and investing wisely. Consider products like:
    • Contribution to Employee Provident Fund (EPF)
    • Payment of Life Insurance Premium
    • Contribution to Public Provident Funds (PPF)
    • Investments in Mutual Funds/UTI
    • Investments in shares/equity
    • Five-year Post Office deposits
    • Tax-saving fixed deposits with a 5-year lock-in period
    • Payment of tuition fees for your children
    • Contribution to the senior citizen savings scheme
    • Payments made to the public deposit scheme of HUDCO
    • Amounts paid for buying a home (stamp duty)
    • Premiums paid for health insurance

Six Ways Salaried Individuals Can Save Taxes:

  • Explore various avenues to reduce your tax burden, such as:
    • Restructuring salary components like food coupons, medical, transport, uniform, telephone bills, and periodicals.
    • Leveraging Section 80C with investments in PPF, Equity Linked Savings Schemes, tuition fees for your children, NSC, and life insurance premiums.
    • Claiming deductions under Section 80D for medical expenses.
    • Exploiting Section 80G for donations to charitable trusts.
    • Utilizing HRA claims.
    • Exploring options like Home loans and Leave Travel Allowance (LTA).

Options to Decrease Tax Burden: For deductions up to Rs 1 lakh:

  • Employee Provident Fund (EPF)
  • Public Provident Fund (PPF)
  • Senior Citizen Savings Scheme (SCSS)
  • National Savings Certificate (NSC)
  • Bank and Post Office tax-saving Deposits
  • National Pension Scheme
  • Life Insurance Schemes
  • Tax-Saving Mutual Funds
  • Home Loan Principal Repayment
  • Children's Tuition Fees

For Deductions Beyond 1 Lakh:

  • Rajiv Gandhi Equity Savings Scheme
  • Employer's NPS contribution
  • Health Insurance Premium
  • Expenses for the treatment of disabled dependents
  • Deduction in case of a disabled person
  • Medical expenditure for self/dependents
  • Interest paid on education/home loans
  • HRA claims
  • Donations

How to Pay Less Income Tax: Here are some useful tips to reduce your tax burden:

  • Encash unused leaves.
  • Utilize Leave Travel Encashment for annual holidays within India.
  • Benefit from tax-free Employee Provident Fund (EPF) withdrawals and gratuity after five years of service.
  • Avail tax-free travel allowance.
  • Claim reimbursements for medical expenses for yourself, spouse, and dependents, up to Rs. 15,000 per year.

Five Things You Should Not Hide from the Income Tax Department: With digitization and streamlined processes, it's essential to be transparent with your financial information to avoid tax-related issues. Don't hide:

  • Mutual Funds investments.
  • Large cash deposits.
  • Property sales and purchases.
  • Interest earned through bank fixed deposits.
  • Salary details, as authorities are aware of your income components.

Tips to Reduce Self-Employment Taxes: For those who are self-employed, consider the following tips to ease your tax burden:

  • Utilize medical insurance deductions.
  • Keep your accounting organized and digital.
  • Separate personal and business deductions.
  • Distinguish children's expenses from business-related expenses.
  • Transform charitable contributions into business expenses.

These strategies can help you navigate the complexities of tax planning and ensure financial health. If you have any unanswered questions or need assistance, don't hesitate to reach out to us for planning and investment-related decisions."

Samiksha Seth
Content Strategist
Dilzer Consultants Pvt Ltd

Sources:

Published on March 10, 2017

 

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