Do you ever find yourself wondering where all your hard-earned money went? You thought you had planned for all the important stuff - that expensive pair of shoes, those new speakers for your car, a DSLR to take photos that could be the difference between a left or right swipe on Tinder. And yet, despite all your meticulous planning, things still didn't add up, and you’re broke all over again.
If you often find yourself in a similar situation, it may be time for you to review your taxes.
Most of us are shelling out a good amount of our earnings on tax, without even realising the scope of tax-exemption! But some are smarter than the rest and have discovered various ways to save tax. These ways are called “deductions” and can help reduce your taxable income.
Since we don’t want you to miss out on all the fun, we’ve compiled a list of legitimate ways provided in the Income- tax Act, 1961 that helps you in tax planning. After all, that money could be spent on some other needs.
Restructuring your salary should be the very first step towards availing tax deductions. Your basic salary will still be taxable but your medical, transport, and telephone allowances are all deductible to some extent. Opting for food coupons instead of food allowances is also a good idea. To know more about this, check out Why it’s important to know your CTC before filing tax returns.
Leave Travel Allowance received from your company to travel anywhere in India with your family is non-taxable too, though it can only be availed twice in a 4-year block. But if you don't claim the benefit in a particular four-year block then one journey can be carried forward to the succeeding block.
Investing in Equity Linked Savings Schemes (ELSS), a type of Mutual Fund can get you a 2-way benefit of saving tax and creating wealth over the long term. Read this blog A Beginners Guide to Equity Linked Saving Scheme to know more about ELSS.
Ever wondered what's better than gifts? Gifts that keep on giving. To every taxpayer’s delight, any gift, monetary or otherwise, received from relatives and those from others with total value less than Rs. 50,000 are exempt from tax and can help in tax planning.
The exemption also includes gifts received on occasion of marriage, through will or inheritance, and from an educational institution, a fund, foundation, or any trust or institution defined in Section 10(23C).
If you are a partner in a firm, this one's for you. As per section 10(2A), a partner in a firm is not liable to pay tax for any income if the firm's incomes have been exempted. Moreover, only the firm is liable to pay taxes and not the partner as well, thus avoiding cases of double taxation.
Here's a useful tip for home loans. If you have taken any home loans, you can claim tax deduction under section 80(C) on repayment of the principal amount. .
Finally, here's some bright and shiny news for parents. If you have a girl child under 10 years of age, Sukanya Samriddhi Yojna can also help you in tax planning. You can deposit an amount of up to Rs. 1,50,000 each year for up to 14 years.
The bottom line is paying tax is inevitable, just like your favourite character on Game of Thrones dying, or an episode of Friends rerun coming on TV. But if you take a minute to stop and think about the tips above, you could save quite a bit of money.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.