6 Tax Saving Ideas and Tips for Salaried Employees

6-tips-for-saving-tax

Tax planning is one of the most crucial things for salaried employees. Paying taxes can be stressful for everyone irrespective of their financial conditions. Everyone wants to save some money by means of tax saving. Nobody wants to pay an extra amount when they have the option to save some tax.

When it comes to taxes, all of us want to save the possible amount by saving our taxes. Check out six ways to keep a considerable amount of your income:

1. By Use Of Section 80C

You can get exemption in taxes of up to INR 1.5 lakhs, under this section. You need to invest in the following things to rescue yourself from paying extra taxes. You can further try to claim this whole amount for a tax deduction.

  • National Saving Certificate (NSC)
  • Employee Provident Fund (EPF)
  • Public Provident Fund (PPF)
  • Post Office Tax Saving Deposits
  • Senior Citizen Saving Scheme
  • Life Insurance Premium
  • Education Fees for Children
  • Equity-linked Savings Scheme

2. Rent Payment

You move to different cities across the nation for your jobs. If your organization does not provide you with accommodation, you have to stay in rented houses because of your job. Hence, the expenses of rent that you bear should be exempted from taxable income.

However, employers give a part of your compensation in the form of House Rent Allowance (HRA). You can get a full or partial tax exemption on this HRA. But if you don’t reside at a rented place but still avail HRA by your organization, then this allowance will be fully taxable.

You can also exempt yourself from HRA tax even if you live with your family as monthly rent can be paid to your parents as well. You need to generate rent receipts and submit them to your employer on time.

3. Salary Restructuring

There are certain expenses that you bear because of your job. Suppose you are working with a firm and you need to commute to your office daily. You are wearing a uniform at your office premises. You are reading a specific newspaper or magazines for your job purpose.

You are doing all this just for the sake of your job. It implies that your employer is supposed to pay for this. The government considers such costs to be exempted from taxes provided they are mentioned by your employer.

You can ask your employer for salary restructuring and mention all such expenses separately like travel, telephone bills, uniform, newspaper, etc. these expenses should not be a part of your salary. However, you cannot ask for all these allowances. Your employer is liable for the eligibility of these allowances.

4. Medical Insurance

The Income Tax Act allows the taxpayer to save taxes on the expenses done for ensuring their health or the health of their family. This saving is allowed under section 80D.

You can buy a medical insurance plan for yourself and your dependent parents. This not only ensures your family’s health but also gives you the deduction, over the 1.5 lakh limit. On health insurance of your family, you can claim a tax deduction up to a maximum of INR 25,000, and if you buy a policy for your parent, you can request for a maximum of up to INR 30,000 deduction.

The health insurance cover for senior citizens comes at a relatively higher price. So, you should ensure the senior citizens in your family to get themselves medically insured.

You can claim the maximum deduction under section 80D as per the following table:

tax-deductions-under-section-80D

5. Tuition Fees

You can exempt yourself from paying taxes for the amount paid as tuition fees for yourself, spouse or children. Also, if you plan to take an education loan for ensuring higher studies across the globe, you can demand dispensation under section 80E.

However, Section 80C of The Income Tax Act provides a reduction in taxes for expenses of tuition fees whereas Section 80E provides for mitigation on the interest accrued on loan is taken for higher education.

6. Charity

Charity is usually done by higher authorities to exempt themselves from paying taxes. It is one of the most helpful ways to save yourself from paying taxes as you can claim 100% deductions and 50% deductions to several charitable trusts.

However, you cannot claim 100% deductions on every charity. The entity needs to be notified for this purpose by the income tax department to claim a 100% deduction. You can avail 100% tax benefits by making donations to some notified NGOs, PM relief Fund, and some political parties. You can also donate to religious trusts and scientific institutions and claim a rebate in taxes.

You should start tax saving investment right after the beginning of the financial year so that you do not get a burden of investing by the end of the year. The government itself has given us various opportunities to reduce the taxes so let’s enjoy these perks and start saving money from now.

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