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Simple Tax Tips for Beginners


Are you averse to the idea of paying a large portion of your income as taxes? If yes, then you are not alone. Most people feel the pinch while paying taxes every year. However, taxes are crucial for the development of the nation and cannot be avoided. Hence, certain provisions have been made by the government to reduce the burden on tax payers. One can take full advantage of exemptions, deductions, and rebates permitted by the Income Tax Act. The financial measures taken to minimize taxes is known as tax planning. It involves arranging your affairs in a certain manner that will help you save taxes. Here are few of the simple and effective tax planning tips:-

  • Utilizing Section 80C:- To encourage the habit of saving among the citizens of the country, the government of India allows certain deductions on the amounts invested in specified instruments under the Section 80C. The most popular investment instruments for the purpose of tax planning are:
  • PPF accounts
  • 5 year tax saving deposits
  • Equity mutual funds
  • Pension plans
  • Life insurance policies or term plans

Investing in these instruments wisely, can serve a dual purpose of meeting financial goals and tax savings concurrently. By Investing in these instruments you can bring down your taxable income significantly and save more of your hard earned money.

  • Salary Restructuring: – Many Companies allow restructuring a few salary components in order to reduce your tax liability. If you are in good term terms with your HR department, talk to them about getting certain allowances included in your salary. Opt for food coupons instead of lunch allowances, as they are exempt from tax up to Rest 60,000 p.a. Additionally, include allowances like medical allowance, transport allowance, education allowance, and telephone expenses as part of the salary as they are non- taxable.
  • Ask for House rent Allowance: – All employees generally receive a house rent allowance (HRA) from their employers. In case you don’t have this component included in your salary, ask your employer to do so. As an employee you can claim exemption on HRA under the Income Tax Act if you stay in a rented house and receive rent allowance from the employer.
  • Charitable donations: – Charitable contributions are deductible up to 10% of your income under Section 80G. However you must ensure that you obtain a receipt from the institution and a copy of their income-tax exemption certificate instead of giving away the donation without any acknowledgement. Only if you produce receipts of the donation, you will be eligible for tax deduction by contributing to a noble cause.

Easy Tax Saving Tips beyond Section 80C

Easy Tax Saving Tips beyond Section 80C – Aegon Life - Blog

As a taxpayer, the first thing that comes to your mind when you think of income tax savings is the section 80 C of The Income Tax Act. Most people are aware about the type of deductions available under the Section 80C. Many of you will be surprised to know that there are several other tax deduction options available apart from those related to Section 80C.

At times, the tax savings provisions under 80C are not enough to save adequate amount of taxes. If you think you have exhausted your 100% income tax limit under the provisions of 80 C, then you are wrong. You can save some more tax using other income tax provisions of the income tax law such as:-

  1. Section 80D– Tax deduction under section 80D qualifies for mediclaim policies. The premiums paid under individual and family medical insurance policy comes under this section. Exemptions are allowed annually for self, spouse and dependent parents/children for maximum amount of up to Rs 15,000. In case of a senior citizen, the maximum amount extends up to Rs 20,000.
  1. 80DD: To provide some relief against the rising medical treatment costs, the Government of India made provisions to provide some relief to those who have a dependent with disability or sever disability under section 80DD of the Income Tax Act. If the person is suffering from 40 per cent of any disability, a fixed sum of Rs 50,000 can be claimed in a year. Similarly, if the disability is 80 per cent, the fixed sum goes up to Rs 1, 00,000 per year.
  1. 80E:- This section pertains to tax exemption on education loans. The interest paid on loans taken for pursuing higher education for yourself or any dependant is exempted from tax under section 80E. This deduction is applicable for a period of 8 years or till the interest is paid, whichever is earlier. However this exemption relevant only for full time graduate or postgraduate courses.
  1. 80GG:- Under this section you can claim tax deductions on grounds of paying rent. If you are a salaried or self-employed and staying in rented house, you can claim a deduction under this section if you do not receive any kind of house rent allowance. Under this section you can claim 25% of your total income or 2000 per month, whichever is greater.
  1. 80CCG:- Deduction under section 80CCG is a new scheme that was introduced to encourage flow of saving in financial instruments. It is known as the Rajiv Gandhi Equity Savings Scheme and is named after the former Prime Minister of India. Under this scheme you are eligible for a deduction up to 50 % of the amount invested in such equity shares or ₹ 25,000, whichever is lower.

In addition to this, there are numerous life insurance plans such as iMax and iReturn which offer taxation benefit under the Section 10D of the Income tax act. So make a wise choice by browsing through different investment products and say goodbye to your tax worries today.

How to save taxes as a salaried individual?

How To Save Taxes As A Salaried Individual? – Aegon Life – Blog

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

  • Conveyance
  • Newspaper, Books and Magazine
  • Medical Treatment
  • Uniform
  • 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.