How to save salary income from tax?

Tax and Salary Planning 

As we know that our income for tax is calculated from April to March but for government employ the salary of March is not counted as March salary is paid in April every year. Every individual must do the home work to save the income from tax but be sure to save income tax we should not waste the money in name of investment. The Income Tax Act offers many more  incentives and allowances, apart from the popular 80C, which could reduce tax liability substantially for the salaried individuals. Let us discuss the option to save the tax:

Utilizing Section 80C

Section 80C offers a maximum deduction of up to R 1,00,000. Utilize this section to the fullest by investing in any of the available investment options.

 A few of the options are as follows: Public

·         Provident Fund

·         Life Insurance Premium

·         National Savings Certificate Equity Linked Savings Scheme

·         5 year fixed deposits with banks and post office

·         Tuition fees paid for children's education, up to a maximum of 2 Children

c     Other option 

If you have exhausted your limit of R 1,00,000 under section 80C, here

are a few more options:

Section 80D –

Deduction of R 15,000 for medical insurance of self, spouse and dependent children and R 20,000 for medical insurance of parents above 65 years

Section 80G- Donations to specified funds or charitable institutions.

House Rent Allowance (HRA)

Are you paying rent, yet not receiving any HRA from your company? The least of the following could be claimed under

Section 80GG:

25 per cent of the total income or

R 2,000 per month or

Excess of rent paid over 10 per cent of total income

This deduction will however not be allowed, if you, your spouse or minor child owns a residential accommodation in the location where you reside or perform office duties.

If HRA forms part of your salary, then the minimum of the following three is available as exemption:

·         The actual HRA received from your employer.

·      The actual rent paid by you for the house, minus 10 per cent of your salary (this includes basic dearness allowance, if any)

·         50 per cent of your basic salary (for a metro) or 40 per cent of your  basic salary (for non-metro).

(Section 24)  Tax Saving from Home Loans

Use your home loan efficiently to save more tax. The principal

component of your loan, is included under Section 80C, offering a

deduction up to R 1,00,000. The interest portion offers a deduction up to

R 1,50,000 separately under Section 24.

 Leave Travel Allowance

Use your Leave Travel Allowance for your holidays, which is available

twice in a block of four years. In case you have been unable to claim the

benefit in a particular four- year block, you could now carry forward one

journey to the succeeding block and claim it in the first calendar year of

that block. Thus, you may be eligible for three exemptions in that block.

Tax on Bonus

A bonus from your employer is fully taxable in the year in which you

receive it. However request your employer for the following:

If you anticipate tax rates to be reduced or slabs to be modified in

the subsequent year, see if you could push the bonus payment to the

subsequent year.

So if you are a salary class than you can save:

  80C -  Rs 100000/-

·         Section 24 – RS 150000/- Home loan interest

·         HRA Full but you have to give PAN number of House Owner if total rent cross one lakh in a financial year.

·         Section 80D – Deduction of Rs 15,000 for medical insurance

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Tag: income tax, saving 2014, Financial year 2013-2014, Section 80c, Saving tax options