Tax Planning Tips For Salaried People

Tax planning for saving income

Tax planning for saving tax

It’s very essential to make proper tax planning and make such investments which can minimize your tax liability. Many times it is observed that salaried people end up paying more tax then they are actually liable to pay. There are many reasons behind this, insufficient time to do proper tax planning, lack of awareness about various incentives, lack of knowledge about rebates and allowances under section 80 C deductions which are very much popular. There are also certain other sections which can help making tax planning and save taxes of salaried people. It is very much important for a salaried person to devote appropriate time and also effort for doing tax planning exercise and also be aware of different benefits which they can get. Here are some of the tax planning tips for salaried people which can help them reduce their tax liability.

  • Use entire section 80 C deduction

Under this section 80 C, the maximum deduction available to an individual is 100000 Pa. generally salaried people whose gross total income is equal to or more than 250000 must utilize this entire limit of 100000. Say for example an individual is having an income of 600000 and he utilizes only half of the amount of limit of 100000. Now this individual will end up paying an extra tax of 15450 as against an individual having same income but utilizing the entire limit. This is a case of poor tax planning. Here are some of the investments which can be qualified for deductions under section 80 C.

  • Public provident fund
  • Life insurance premium
  • National savings certificate
  • Accrued interest on national savings certificate
  • Equity linked savings scheme
  • 5 year fixed deposit with post office and banks
  • Tuition fees paid for kids’ education
  • Principal component for home loan repayment
  • Restructure the salary

Restructuring the salary is the right way of tax planning. It includes certain factor which goes long way in deducting your tax liability. It is an efficient way of tax planning and claiming tax benefits. Below mentioned things can form part of one’s salary structure.

  • Food coupons like ticket restaurants and sodexo are exempt from tax up to 60,000 per annum.
  • Medical expenses which are being reimbursed by employer are exempt up to 15000 per annum.
  • Transport allowance is exempt till 800 per month.
  • Individuals staying in rented place are allowed house rent allowance as a part of their salary.
  • Opt for a joint loan

The principal repayment on a home loan is eligible for deduction up to 100000 Pa and the interest paid is also eligible for deduction till 150000 per annum.  In certain cases where home loan is for substantial sum, it is very much common that the principal repayment and interest will exceed the specified limit. For making sure that the tax benefit is fully utilized, an individual must opt for a joint loan with his or her spouse or siblings or parents. By doing so both the loan holders can claim their part of tax deduction and this is an effective way of tax planning.

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