It is that time of the year where every tax payer frantically tries to make investments to minimize taxes. However, people are unaware of how exactly they can minimize their tax. Here we have listed seven ways apart from the popular 80C by which you can reduce taxes.
1. Maximise deduction under Section 80C
You can save up to Rs.1,50,000 under the section 80C. There areseveral investment options that help you save under section 80C. These options include;
Life Insurance Premium
Public Provident Fund
National Savings Certificate
5 year fixed deposits with banks and post office
Equity Linked Savings Scheme
Tuition fees paid for children's education, up to a maximum of 2 children
Do note that you can claim the deductions under 80C directly in your tax returns and not via your employer if you make your investments before the fiscal year.
2. Other than 80 C
There may be times when you exhaust your options available under the section 80 C. In such cases, you can look beyond 80C and think of options such as;
Section 80D under which you can avail a tax benefits on medical insurance.
Below 60 years of age: In case none of the family member(self, spouse,children) are above 60 years of age, the deduction is up to Rs. 25,000. Medical insurance for parents below 60 years can help get deduction of up to Rs.25,000. Hence , an individual can claim up to Rs.50,000 deduction on medical insurance.
Either parent above 60: In case one of the parent is above 60 years of age, tax benefit of up to Rs.50,000 can be claimed. Additionally, for premium paid for self, spouse or children, an individual can avail Rs.25,000 deduction. Hence, overall benefit in this case can be up to Rs. 75,000 in a year.
Eldest member is over 60: If one member of the family- spouse, self or children is above 60 years, the tax benefit is Rs.50,000 on medical insurance. Also, for parents over 60, an individual can claim Rs.50,000 benefit. Hence, the total in such a case can help avail up to Rs. 1,00,000 a year. (Source: IndiaTimes)
Under Section 80G- for donations to charitable institutions or other charity funds.
3. Restructuring of your Salary
Now, this may be a feasible option for many. However, for those of you who are in good terms with the HR department or if your company permits, you could get a few components of your salary restructured. Doing this may help reduce your tax liability.
You can achieve this by changing the following;
Go in for food coupons instead of lunch allowances. Food coupons exempt up to Rs.55 per day for 22 working days for up to 2 meals.
Mention education allowance, telephone expenses, transport allowance, medical allowance, etc as part of your salary. You may then produce the actual expenses (in the form of a bill) to reduce tax.
Try to use the company car instead of your own to reduce taxes
4. Home loans
Yes, you can use your home loan as well to save tax. Typically, you can get a tax deduction of up to Rs.1,50,000 under section 80C as the principal component of your loan is included in it.
This tax deduction includes the total of deduction allowed under section 80C such as Tax Saving Fixed Deposits, PPF Account, Equity Oriented Mutual funds, Senior Citizens Saving Scheme National Savings Certificate, etc.
You can also avail a tax deduction of up to Rs.2,00,000 separately on your interest under section 24.
5. House Rent Allowance (HRA)
You can avail HRA from your company in case you are staying in a rented house. You can claim the following under section 80CG
Rs.5000 per month
25% of your adjusted total income
Excess of rent paid above 10% of your total income
Although this may sound lucrative, you must understand that the deduction is not applicable in case your spouse or child owns a house in the location where you reside or work.
Again, if the HRA is a mentioned as a part of your salary then the following options may be used to avail an exemption;
6. Tax on bonus
As a matter of fact, the bonus you receive from your employer is taxable in the year you receive it. However, you can change that by using the following ways;
If it is possible to modify the slabs in the subsequent year, you could push the bonus payment for the subsequent year or you could wait for the tax rates to be reduced in the following year.
Produce your tax investment details in advance in order to avoid any tax deduction on the bonus.
7. Leave Travel Allowance (LTA)
Most companies offer leave travel allowance for holidays in a four- year block. In case you have not been successful in claiming the benefit in a particular four-year block, you could carry it to the next block and claim it in the first year of that particular block. This may help you get three exemptions in that four-year block.
Saving some money is not bad when done correctly and within the limits of law. However, make sure that you produce all the details of your loans and tax saving investment in advance and also ensure that you check the Form 16 provided by your employer thoroughly.