With efficient tax planning, you can bring down your taxable income by a significant amount. Many salaried professionals end up in a difficult situation when they are looking for tax-saving investments. Many delay the decision until the last moment and end up paying a higher tax amount. If you are a salaried professional, you need to be aware of the different ways in which you can save tax. Here are various ways that can help you save tax in India.
- House Rent Allowance (HRA)
The rent you pay to your property owner will allow you to get benefit from taxation. The HRA that is eligible for tax exemption is the minimum amount among your actual HRA, extra rent paid over 10% of the salary, or 40% of the basic salary in non-metros or 50% of the basic salary in case of metros.
- Children education allowance
You can get a tax benefit of INR 100 per month per child. This benefit is applicable up to a maximum of two children. If the children are admitted to a hostel, there is a hostel allowance of INR 300 per month up to two children.
- Transport allowance
There is a transportation allowance of INR 1,600 per month to travel to and from work.
- Leave travel concession
You can get a concession on the leave travel. It is the actual expense in terms of fare for the shortest route. You can take two trips in a block of four years. However, the amount should not exceed the cost of a first class rail AC fare or the economy class fare in case of air travel. This benefit is applicable only if you have traveled within India.
- Health insurance
Whether you are covered in a group medical insurance policy or have an individual policy, the amount paid in the form of the premium will be eligible for a deduction under Section 80D. According to this section, you are eligible for a tax deduction up to INR 25,000 for the premium paid for self and family. Buy health insurance to make the most of this deduction and to secure your health. Many health insurance companies offer quality insurance plans for you and your family. You can compare the quotes online and make a buying decision.
- Life insurance premium
Any amount paid towards the life insurance premium is exempt from tax under Section 80C. There is a maximum cap of INR 1.5 lakh under this Section.
- Retirement benefits
The amount in your Employee Provident Fund (EPF) is allowed as a deduction under Section 80C. The maximum limit under this section is INR 1.5 lakh. In addition, any investment made in the pension fund is also eligible for a deduction from the income under Section 80C. In the case of government employees, the gratuity payment is completely exempt from tax,
These are a few provisions, which can help reduce the amount of tax for a salaried employee. It is important to do advance planning and make decisions keeping the financial goals and current financial condition in mind.