As the financial year end draws near, taxpayers frantically start seeking for ways in which they can save paying income tax. The more known options to save income tax is either with ULIP or opting or Section 80C. However, approaching this without taking a look at the various options available in the market can put the investor in a dicey situation.
The Income Tax Act of India lets the taxpayer enjoy many incentives and offer allowances which can substantially reduce the tax liability of the salaried individual. Some of the ways in which you can reduce the tax liability are:
- Salary restructure
- Use Section 80C
- Home Loan
- Travel allowance
Let’s take a look at each of the pointers mentioned above in detail:
Restructuring the salary:
While it is tad challenging to restructure your salary, it is not impossible. If your company allows restructuring a few components of your salary, then you could save up substantially on the tax. A few things that you can do are:
- Opt for food coupons instead of lunch allowances.
- Include medical allowance, transport allowance, telephone expenses as a part of your salary.
- Save the income tax with ULIP plans
- Include insurances that are in accordance with Section 80C.
- Opt for company transport instead of a private vehicle. This will help to reduce high prerequisite taxation.
Using Section 80C:
The beauty of opting for Section 80C is that it offers you a deduction of Rs. 1,00,000, at the most. So, it makes sense to utilize this section by investing in the available options such as:
- Public Provident Fund
- Life Insurance Premium
- Unit Linked Insurance Plans in India
- National Savings Certificate
- Fixed Deposits for at least five years with nationalised banks or post office
Home Loan helps to save tax:
Apart from the various insurances such as the unit linked insurance plans in India, your home loans can be just as efficient to help you save tax. The principal component of the loan is included in Section 80C which allows you a deduction of up to Rs. 1, 00,000. However, the interest part of the home loan offers you a deduction of Rs. 1,50,000. This is comes under Section 24.
Use leave travel allowances:
Using/ availing for Leave Travel Allowance for holidays is another way to save up on taxes. You can take the leave travel allowance only twice every four years. So, if you haven’t been able to avail it for any of the four-year blocks, you can do it now and carry on one journey to the succeeding block. This can be claimed in the first of the calendar of that block. Which means you will be eligible for three exemptions in that block of the year.
Also, to avoid the hassles of last-minute tax planning, ensure that you provide the concerned authorities with all the details of your loans and tax saving investments. Making it a habit to check and collect form 16 at the end of every year from your employer, can help to exempt tax. To be on the safer side, start the tax planning before the financial year ends.