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Tax Saving, The Need Of The Hour

We All Dream Of Living In A Tax Free World Or Aspire To Pay Less Tax

Tax Saving, The Need Of The Hour

Everyone wants to save tax and earn more. As March approaches, every person feels the regret of not investing in tax saving schemes and ends up paying more tax. Employers, tax man or few reminder emails from banks start giving triggers that it is the season has come to plan your tax. Basic tax saving knowledge is given by employers also to gain save their employees from paying extra and feeling hurt later.

We all dream of living in a tax free world or aspire to pay less tax. This dream can only be fulfilled if we plan well in advance. Tax paying is considered as pain by most today, but lack of knowledge about tax saving and being late in planning adds up to stress. Being in rush to complete tax saving exercise , we end up investing in wrong schemes like investing in product without researching.

Have your tax saving exercise been done rightly ?

This exercise should be done wisely. One should look for exemptions in any sections available. Section 80C consists of most commonly tax saving avenues. One should look for these eight parameters before investing in any product – liquidity, ease of investment, taxability of income, returns, safety, cost, flexibility and transparency. This will help you invest in right product.

Here is a short checklist which one can follow to save tax.

First, we should know in which tax bracket we fall, let’s check this year tax slab:
Individual (resident or non-resident), who is of the age of less than 60years at any time during previous year
Net income range Income – Tax rate
Upto Rs. 2,50,000 Nil
Rs.2,50,000 – Rs. 5,00,000 5%
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Resident senior citizen i.e. of 60 years or more but less than 80years at any time during previous year
Net income range Income – Tax rate
Upto Rs. 3,00,000 Nil
Rs.3,00,000 – Rs. 5,00,000 5%
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Now let us move towards schemes we need to invest in to save tax easily:

1. Medical Insurance
Tax saving u/s 80D – Deduction for the premium paid for medical insurance upto Rs. 25,000

2. Donations
Tax saving u/s 80G – donation to registered charitable organization is exempted with no upper limit.

3. House rent allowance
Tax saving u/s 10(13) – if you are paying rent of more than Rs.1,00,000 annually than you have to submit PAN card copy of your landlord.

If HRA is included in your salary, than the following are expemted from tax:

● Actual HRA received
● Actual rent paid minus 10% of your salary
● 50% of your basic salary(metro cities) or 40% (non-metro)

4. ELSS (Equity Linked Saving Scheme)
Tax saving u/s 80C – gains from ELSS is tax fee till Rs. 1 Lakh

5. Public Provident Fund
Tax saving u/s 80C – Investment and interest from PPF are tax-free

6. Insurance policy
Tax saving u/s 80C – Maturity amount and premium is tax free

7. National Pension Scheme
Tax saving u/s 80C – contribution to the scheme is exempted
Tax saving u/s 80CCD – there is an additional deduction of up to Rs. 50,000

8. Sukanya Samriddhi Yojna
Tax saving u/s 80C – this can be opened only for girls below the age of 10. The interest earned is tax free.


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9. Amount received as a gift on marriage
Tax saving u/s 56(2) – cash, cheque or expensive gifts received as Marriage gift is totally tax-free.

10. Leave travel Allowance
Tax Saving u/s 10(5) – you, your spouse, two children and dependent parent are covered in this scheme.

I hope the above investment will help you to take the exemption of 1.5 Lakh. Lastly, I would like to give you three final tips to avoid last-minute hassles:
● Check form 16 received in year-end thoroughly.
● Provide your employer details of loans and tax-saving investment beforehand.
● It is advisable to start your tax planning before 31st March and file your return before 31st July.

What do you think?

Written by akanksha

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