Five Tips for Saving Tax by Which You can save lakh

Tips for Saving Tax

As the deadline for submitting the investment proof to your employer is approaching near and near, the people are in a hurry to look for the right tax saving options. It is very difficult to believe but true that most of us find it very difficult to do proper tax planning at the right time. As a result of that, we have to go through a tough time every year to save tax. We become busy, how to cover the limit of 80C as 1.5 lakh. But other than 80C there are some options you should know by which you can avoid a fair amount of income tax.

Also Read: Various ways of saving tax. and

                    ELSS or PPF: Where to invest for tax saving

Here are the five tips for saving tax which may be very effective to you.
1. House Rent

Those who are residing in a rented house will be eligible for tax benefit. The amount of exemption shall be least of the followings:

  • The actual HRA received
  • Excess of rent paid over 10% of salary (Basic + DA)
  • 50% of salary (Basic + DA) if accommodation is located at Kolkata, New Delhi, Mumbai & Chennai, and otherwise deduction would be 40% of salary (Basic + DA)

Example: Suppose, you are getting HRA from your employer and the amount is Rs 8000 per month or say Rs 96000 per year. Your basic and DA is Rs 20000 per month.

You are paying rent of Rs 15000 per month to your landlord i.e. Rs 180000 per year.

According to option1: the actual HRA received i.e. Rs 96000

Option2: Excess of rent paid over 10% of salary i.e. Rs 180000-Rs 24000=Rs 156000

Option3: 50% of Rs 240000= Rs 120000

The minimum of above three options is option1. Hence, you will get a deduction of Rs 96000 in your income which will ultimately lower your tax burden.

2. Medical Benefit

Employees can claim a deduction on amounts spent on Medical expenses incurred during the financial year up to Rs 15,000/- or actual medical allowance received during the Financial Year, whichever is less.  Please be diligent in keeping the medical bills for doctors’ consultation, medicine charges, investigation charges etc. from the start of the financial year. We are facing difficulties in collecting at the last moment during submission of these documents at the end of the financial year.

The expense can be for self, spouse, children, and in the case of parents, brothers and sisters of the employee, if they are wholly or mainly dependent on the employee.

Though everybody knows that health insurance premium claims tax benefit, many people forget to claim the tax benefit with this medical benefit.

3. Children Education Allowance

The employer asks the numbers of children you have and many of us do not notice it properly and left it blank. Be attentive while filling up the forms and don’t miss any small detail by which you can actually save some money. The above information is required by the employer to calculate the deduction as education allowance.

Education Allowance is exempted to the extent of Rs. 100 per child per month up to a maximum of two children.

Also ReadA Short Guide of Financial Planning for Child Future

4. Mobile Phone and Internet Bill Reimbursement:

It is meaningless to say that we all use mobile phones and the internet. The reimbursement of mobile and internet bills used for office work is tax-free. There is no limit on the amount of reimbursement for this and it depends on work profile.

For example, If you claim Rs 1000 for mobile and Rs 1,000 for internet expense upon submitting the bills for an entire year, Rs 24000 will be deducted from your income which will lower your income tax.

5. Transport Allowance:

Transport Allowance up to Rs 1600 per month is tax-free. So in a year Rs, 19200 for conveyance allowance can be deducted from your income and tax will be calculated accordingly.  Even if your employer pays more than 1600 per month, you can only claim tax exemption up to Rs 1600.

If you don’t have this amount in salary slip, tell your employer to include this component in your salary slip to claim the income tax benefit.

Share and help to minimize the tax outgo.