Towards the end of the financial year, individuals begin to plan their investments to minimize their taxes and expenditure. However, most individuals do not have enough knowledge about the varied schemes. The IT Act has many tax saver plans to offer that includes incentives, allowances, deductions etc. besides provisions under section 80C for the service class individuals. These investments reduce your tax liabilities substantially. The tips as mentioned under can be extremely helpful for creating a robust tax saving plan:
Structure Your Salary
Structuring your salary will not be feasible always however, if your company is employee friendly, then it is easier to structure your salary components accordingly, thereby reducing your tax liability. Let’s see how as quoted under:
- Choose lunch/dinner allowances for tax exemption up to Rs.50 per meal.
- Pick medical allowance, transport allowance, education/uniform allowance etc. after producing relevant documents.
Take Full Advantage of Section 80C
To take full advantage of section 80C, it is important to opt for deduction upto Rs.1,00000. One can utilize this opportunity to the best extent possible by investing in any of the below mentioned investment options. A handful are listed as under:
- Public Provident Fund
- Life Insurance Premium
- National Savings Certificate
- Equity Linked Savings Scheme
- Fixed deposits for a term of 5 years
- Tuition fees of children’s education, up to a maximum of 2 kids
Any top investment plan can be chosen online.
Options Over & Above Section 80C
Sometimes, even after using options under section 80C, tax exemption can be further worked on. A few good options can be taken note of as mentioned under:
Section 80D – Deduction of Rs. 15,000 for medical insurance of self, spouse and dependent children and Rs. 20,000 for medical insurance of senior citizens.
Section 80G – Donations to specified funds or charitable institutions.
Give your company all details of loans and tax saver plans beforehand, to avoid any deduction.