Are you a salaried employee who is looking up to do an effective tax planning? Then, you need to know that tax planning is nothing but a matter of discipline and timing.
The planning involves some set of decisions at the beginning of the financial year in April, and the discipline should come when you stick to the plan during the year.
If you are a salaried individual, some specific tax saving tips for you should help. These tips may also help in lessening the tax outgo and assist in meeting your financial goals as well.
People who don’t know how to calculate tax can look up to the Income Tax Calculator to get it done free on many websites.
1) Have a good look at Section 80C
When it comes to salaried persons’ taxation, nothing helps more than the Section 80C. Thus, the biggest tax planning advice for the salaried employee will have a good look at Section 80C to enhance take-home salary, reduce income tax legally and lower tax payout. The Section 80C offers a wide range of options to assist people to reduce the liability of tax on them. As high as up to Rs.1.5 lakh in terms of tax benefits, Section 80C is vital for tax paying people.
2) Begin with the most vital options
While you are reviewing the Section 80C advantages, opt for options that you may take anyway, even in the absence of a tax benefit. It should generally begin with employee provident fund (EPF), life insurance, tuition fees and more. You can now deduct all these from the starting point of Rs1.5 lakh.
3) Get started with Rs.1.5 lakh
You should start to make Rs.1.5 lakh as your starting point and also work backward. You can do that by reviewing some most suitable options such as PPF, insurance, tax-paying mutual funds. National Savings Certificate (NSC) and so on. The allocation of the investment plans should primarily depend on your risk profile, income limits/levels and of course the financial goals that you wanted to achieve.
4) Get to look at some other alternatives as well
Once you have got the most essential options, it’s time to take a look at some second line options. It should generally include tax-saving mutual funds, and unit-linked insurance plans (ULIP), if you love taking the risk or NSC or PPF if you would play safe. Also, investing in a pension plan will help you save tax as your premium payment as per the Section 80CCC – a sub-section of the Section 80C. In the same context, the New Pension Scheme (NPS) under Section 80CCD will also let you enjoy tax benefits.
5) Home loans
Did you know that if you have availed a home loan to purchase your dream home, you can claim tax benefits under Section 80C? Yes, you can do that by furnishing principal re-payment proof on the home loan. What’s more, you can also claim tax benefits under Section 24 towards interest payment on housing finance.
Additional Reading: Quick Checklist for Income Tax Returns ( ITR ) at a Glance
6) Dot ignore other sections
Here are some not so important sections that help you avail of tax benefits which you may also consider such as:
- Rent receipts to enjoy HRA tax benefits
- Medical bills to avail tax-free medical allowance
- Travel proof to claim the leave travel allowance (LTA) – twice in 4 years
- Premium receipts of mediclaim/health insurance
- Education loan statement with interest component details
- Donation proof under Section 80G
The Bottom Line
You can now begin with your tax planning which will help you save income tax under Sections and overheads as discussed. You can also start using the income tax calculator to know your exact tax to be paid so that you can sync the tax planning accordingly.