_ap_ufes{"success":true,"siteUrl":"www.investmentyogi.com/w","urls":{"Home":"http://www.investmentyogi.com","Category":"http://www.investmentyogi.com/category/alternative-investment/","Archive":"http://www.investmentyogi.com/2015/02/","Post":"http://www.investmentyogi.com/salient-aspects-of-union-budget-2015/","Page":"http://www.investmentyogi.com/nri/","Nav_menu_item":"http://www.investmentyogi.com/trending/","Wpcf7_contact_form":"http://www.investmentyogi.com/?post_type=wpcf7_contact_form&p=5591"}}_ap_ufee

Yogi Zone

Useful articles for your finance management by our team of experts

7 Income Tax Saving Options for Salaried Individuals

tax saving options

At the end of every financial year, many tax payers frantically make investments to minimize taxes, without adequate knowledge of the various available options. The Income Tax Act offers many more incentives and allowances, apart from the popular 80C, which could reduce tax liability substantially for the salaried individuals. Here are 7 smart income tax saving options to help you save more and reduce taxes.

1. Salary Restructuring

Restructuring your salary may not always be possible. But if your company permits, or if you are on good terms with your HR department, restructuring a few components could reduce your tax liability

  • Opt for food coupons instead of lunch allowances, as they are exempt from tax up to Rs 60,000 p.a.
  • Include medical allowance, transport allowance, education allowance, uniform expenses (if any), and telephone expenses as part of salary. Produce bills of actual expenses incurred for these allowances to reduce tax.
  • Opt for the company car instead of using your own car, to reduce high perquisite taxation.

2. Utilizing Section 80C

Section 80C offers a maximum deduction of up to Rs. 1, 00,000. Utilize this section to the fullest by investing in any of the available investment options. A few of the options are as follows.

  • Public Provident Fund
  • Life Insurance Premium
  • National Savings Certificate
  • Equity Linked Savings Scheme
  • 5 year FD (Fixed Deposit) with banks and post office.
  • Tuition fees paid for children’s education, up to a maximum of 2 children.

3. Options beyond 80C

If you have exhausted your limit of one lakh under section 80C, here are a few more options.

  • Section 80D– Deduction of Rs. 15,000 for medical insurance of self, spouse and dependent children and Rs. 20,000 for medical insurance of parents above 65 years.
  • Section 80CCF (currently not available)- Deduction of Rs 20,000, in addition to the Rs 1 lakh under 80C, for investments in notified infrastructure bonds.
  • Section 80G- Donations to specified funds or charitable institutions.

4. House Rent Allowance

Are you paying rent, yet not receiving any HRA from your company? The least of the following could be claimed under Section 80GG.

  • 25% of the total income or,
  • Rs 2,000 per month or,
  • Excess of rent paid over 10% of total income
  • This deduction will however not be allowed, if you, your spouse or minor child owns a residential accommodation in the location where you reside or perform office duties.
  • If HRA forms part of your salary, then the minimum of the following three is available as exemption.
  • The actual HRA received from your employer
  • The actual rent paid by you for the house, minus 10% of your salary (this includes basic + dearness allowance, if any)
  • 50% of your basic salary (for a metro) or 40% of your basic salary (for non-metro).

5. Tax Saving from Home Loans

Use your home loan efficiently to save more tax. The principal component of your loan, is included under Section 80c, offering a deduction up to Rs. 1, 00,000. The interest portion offers a deduction up to Rs. 1, 50,000 separately under Section 24.

6. Leave Travel Allowance

Use your Leave Travel Allowance for your holidays, which is available twice in a block of four years. In case you have been unable to claim the benefit in a particular 4 year block, you could now carry forward one journey to the succeeding block and claim it in the first calendar year of that block. Thus, you may be eligible for three exemptions in that block.

7. Tax on Bonus

A bonus from your employer is fully taxable in the year in which you receive it. However request your employer for the following.

  • If you anticipate tax rates to be reduced or slabs to be modified in the subsequent year, see if you could push the bonus payment to the subsequent year.
  • Produce your tax investment details well before, to prevent your employer from deducting tax on bonus before handing it over.

A Final Word

Keep in mind the below points, to avoid the hassles of last minute tax planning.

  • Give your employer details loans and tax saving investments before hand, to prevent any excess deduction.
  • Check the Form 16 received at the end of each year from your employer thoroughly.
  • It is important to start your tax planning well before 31st March, and to file your returns before the 31st of July each year.

Check Out Similar Interesting Articles

Understanding CTC and salary breakup

Top 10 LTA FAQs

Plan your salary structure for better tax planning

Invest in company fixed deposits

  • BIDYUT

    NICE

    • Yogi Cfp

      Thank you for the appreciation, Bidyut.

  • logudotcom

    Good article, thanks for the info

    • Av Suresh

      You are welcome.

  • Guest

    there is a typo in point 1, read it as “perquisite”

    • Av Suresh

      Thank you for the suggested correction. We have corrected it.

  • Ranga Vittal N

    Dear Sir,
    If any amount spent on surgery of Aged Dependant Parent will be eligible for Tax Saving?
    I have spent Rs.56000/- for surgery of my mother and Rs 69000/- for my father for regular treatment of cardiac administration.
    Are these elibible for tax benefits ? if so, under which section I have to show?
    Can you pls help me?
    rangavittaln2008@gmail.com

  • Rahul Manas

    Section 80C offers a maximum deduction of up to Rs. 1, 50,000 now….

  • Rahul Manas

    Section 80C offers a maximum deduction of up to Rs. 1, 50,000 now….

  • Rahul Manas

    Section 80C offers a maximum deduction of up to Rs. 1, 50,000 now….

  • Rahul Manas

    Section 80C offers a maximum deduction of up to Rs. 1, 50,000 now….

  • Amit

    My Salary is Rs.20,00,000 inclusive of BS, DA, HRA . I want to reduce it to minimum liability for tax. Please tell me how I can go with this thing. What is the procedure which can be adopted?

  • Nitin Kumar Agarwal

    Hi Suresh,
    Nice article. Can I publish it on our page?