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How To Save Tax In India

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  • How To Save Tax In India
    2018-07-07, By: System Administrator
    When it comes to pay tax do you get these questions in your mind you feel that you are paying excess tax? Do you think that you can save tax? Your tax planning is proper? These are certain steps to follow to save tax. 1. Revise salary and save tax When you are in job you face many small expenses, which you are required to make. It include your traveling expenses, your expenditure on entertaining clients, study material like books, journals that you need to buy to keep yourself well-informed. These are all part of those expenses that you are forced to do. Therefore you need extra money besides salary to fulfill your requirements. 2. Rent Payment If we are on rent accommodation and we if we don’t get any rent allowance from company than we cannot show it as investment. Employers give away a part of your remuneration as House Rent Allowance. However, you cannot get complete benefit of HRA for tax saving. 3. Leave Travel Allowances and Medical Expense You will also get benefit in tax if you produce medical bills. But this depends on cases where the company provides medical allowance to its employees. Therefore it is important to keep a record of all medical bills in a year. However, it is limited to Rs 15,000 in a financial year. Receipts of medical expenses of your relatives and dependents can also be used. 4. Invest and Reduce Taxable Income Make certain investments under section 80C to get rebate in tax. This amount invested is deducted from the taxable income. Many of such investments come under EEE category. It means you need not to give tax at the time of investment, earning and redemption. List of Investments Which Saves Tax Contribution to EPF account Employee Provident Fund is a retirement saving instrument. Contribution to the EPF is mandatory for the employees of organized sector. The employer also contributes equal amount in the EPF account of employee along with the amount deducted the same amount from the employee’s salary. The contribution to EPF by employer is tax exempt, while contribution by the employee is tax deductible under section 80C. Deposit in PPF account PPF account is a government saving scheme, but run for a long term. Anyone can open the PPF account in SBI, post office or other banks. Under section 80C the PPF account provides tax deduction. Investments in tax saving mutual funds like the Equity linked saving scheme are diversified mutual fund scheme. The ELSS invests in share market. It has potential of highest return. Sukanya Samriddhi Account It is a saving scheme for the girl child by the government. It gives highest return among all the small saving schemes. The investment and maturity amount is tax-free. Tax Saving Fixed Deposit Fixed deposit for tax saving is just like any other fixed deposit of bank. The only difference is the lock in period of 5 years. The interest earning of tax saving FD is subject to tax. National Saving Certificate (NSC) It is post office small saving scheme. The national saving certificate is issued for 5 years. The interest rate of this scheme is 8.5%. the NSC gives tax benefit under section 80C. The interest is subject to tax. Senior Citizen Saving Scheme This is a small saving scheme by the government, designed for senior citizens. This scheme gives regular income. The interest rate of senior citizen saving scheme is better than NSC or PPF. 5. Expenses Eligible for Tax Saving Some expenses are also added in the expenses eligible for tax saving to amount limit of 1.5 lakh deductions. Tuition fees for self and children Insurance scheme premium Home loan principal payment- Home loan EMI has two-part, principal and interest. However, the expenses should not exceed 1.5 lakh limits. 6. Medical Insurance Deduction Medical Insurance expense gives you the deduction, over and above the 1.5 lakh limit. Health insurance premium of the family members also helps to save tax. Even time to time health checkup done will save tax. You can deduce these expenses from your total taxable income. 7. Enjoy Tax Benefit on Home Loan Interest Payment Home loan interest payment enjoys separate tax saving. It can give a very big tax saving. To get complete benefit the loan amount should be big. 8. Set off Capital Gain, Save Tax Salaried people need to give capital gains tax on their investments. Shares attract only short-term capital gains tax while property and gold attract both short and long term capital gains taxes. However, you can set off your capital gain from an investment with the capital loss of another investment. The capital loss can be carry forward to 8 years. This will give a fairly good chance of tax saving on account of capital loss. Suppose you incur trading loss in shares. This loss can be carried forward up to seven years. In subsequent years your trading profit can be set off with this big loss. 9. Giving Away Money For Charity, Why Pay Taxes You can save tax on your donations. Donations to the PM relief fund, some notified NGO and political parties can give you the 100% tax benefit. You can also donate to scientific institutions and religious body and claim tax rebate. 10. On Time Tax Declarations And Investments Practically, this is the most important tip of tax saving. Employers need to pay advance tax every quarter. Therefore, they deduct TDS every month from your salary. The TDS is deducted according to your projected tax liability for that financial year. If you don’t declare your planned tax saving, investment and expenses of the year, the projected tax will be higher. Accordingly, the employer would start deducting TDS every month for the first quarter of the financial year. It may happen that when you declare all of your tax saving instruments, it has become very late. The company may have cut more TDS than required. Of course you can claim tax refund while filing income tax return, but for the time being you pay extra taxes. So, give a tax declaration at the beginning of the year.
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