Salaried individuals are one class of people that have to pay maximum taxes in our country. This often leads to disappointment among salaried individuals. Of course, who would be happy knowing that half of the hard earned income has been deducted in the form of taxes? But with the right tax planning strategies, it is possible to save your income from tax liabilities. Here are few ways that will help you save taxes as a salaried individual.
Restructure your salary: We often spend money from our own account on expenses which are actually company’s or employer’s requirement. For example, If you wear a uniform for your job’s sake or talk to a client with your own mobile phone. Such expenses should be certainly covered by your employer. Ask for the restructuring of your salary, if you are the one who is paying for the following expenses.
Some allowances which save tax
- Newspaper, Books and Magazine
- Medical Treatment
- Telephone and Mobile
- Office Entertainment
Make use of section 80C: Under section 80C, you can avail a maximum tax deduction of Rs 1 lakh by investing in any of the following options
- ELSS(Equity linked saving scheme)
- Public provident fund
- Life insurance policy
- Fixed deposits
- National saving certificates.
Save tax on rent payment: You may be working outside your city and do not have a company accommodation. Expenses on rent payment should be deductible from your taxable income. House rent allowances include 25 % of the total income. However, the deduction will not be allowed if you own a residential house in that location.
Reimburse travel and medical expenses: Personal expenses such as travel and medical are also tax deductible. Although you will be required to provide proper receipts and bills in order to claim the deduction. Deduction, under this category, is limited up to Rs 15,000.
Tax saving from home loans: As a salaried individual, you will always consider a home loan option before buying a house. In such case, do not forget to take into account tax deductions which are applicable to both principal payments as well as interest payment. Section 80C offers deduction up to Rs 1 Lakh on principal component of your home loan.
Apart from considering all the above tax saving options, consult a professional tax planner to avoid any last minute hassle. It is important to start your tax planning well before 31st March and to file your returns before the 31st of July each year.