Towards the end of every financial year, we frantically find means and avenues to save taxes or minimise them. However, many often go about these investments without having complete knowledge of its intricacies. The extent of common knowledge about the Income Tax Act is restricted to Section 80C. However, there are many more incentives and allowances that can reduce tax liabilities for salaried employees. In your attempts to save taxes, here are seven basic pointers you should know:
- Salary Restructuring
Many companies do not have a restructuring clause. However, if your company permits it or if you can convince your HR department to restructure your salary, you can reduce your tax liability. Some tips for restructuring can include:
- Opting for lunch coupons instead of inclusive lunch
- Including medical, travel, education and other such allowances as part of your salary. Then when you produce bills of actual expenses incurred, you can reduce the tax.
- Optimally utilising article 80C
This is the most common clause under the Income Tax Act that, almost everyone who is concerned about saving tax is aware of. Section 80C provides a maximum benefits of up to Rs 1, 00,000. You can optimally use this section by applying it in various investment schemes. Some examples of investment schemes can be:
- Life or Term Insurance Policies
- National Savings Certificates
- 5 Year fixed deposits with banks
- Investment Schemes
Speaking of investment schemes, there are various ones you can apply into. One such investment scheme that is gaining popularity is Equity Linked Savings Schemes or commonly known as ELSS. These are mutual fund schemes that are designed to save taxes. Although these investments are high in risky propensity, their returns are very commendable. If your risk portfolio makes ELSS mutual funds a favourable idea, then you are bound to receive massive benefits.
- Government Aid
The Government has made various initiatives in order to induce individuals to apply into their schemes. One of the main motivators for people to enrol into these schemes is its tax saving methods. Rajiv Gandhi Equity Savings Schemes is one such option. Here people can invest up to Rs 50,000 in approved stocks. The catch is that if you want to enjoy tax benefits, then only first time investors can invest.
- Public Provident Fund Schemes
Under Section 80C, your PPF amount is subject to tax deductibles. Further, the interest received is also tax-free. If you have a short-term agenda, then this may not be the best policy since Provident Fund Schemes have a 15-year investment period.
- Beyond 80C
Section 80D offers a tax deductible of Rs 15,000 for yourself, your spouse or child. You can also receive Rs 20, 000 for medical insurance for parents about the age of 65 years.
Do not start worrying about tax saving investments and other methods towards the end of the financial year. If you are heavy into tax savings investments, you can do so throughout the year. This will allow you to gain more than you would, if you started later. Start your efforts towards tax savings in the initial quarters of the year instead.
Want to know your taxes? Access our easy to use tax calculator, and plan your finances.