If you haven’t been paying much attention to your taxes, start of a new financial year is a good time to do so. Tax planning is an important part of your overall financial goals. And the more attention to pay to them the more moolah you’ll be able to add to your pocket – you’ll also end up saving yourself from the last minute tax filing headache.
We’ll get you started with these tips –
- Understand what makes up your salary – Ask your HR or payroll dept to give you a detail of your pay cheque. Look up your payslip. If it has components like HRA and LTA, you can save tax on them. HRA can be claimed when you live on rent. In some cases you may be able to claim HRA as well as pay the EMI for your house. Planning a long weekend getaway – check if you’ll be eligible to claim that against your LTA. If your employer doesn’t provide you cab services, you can ask for them to give some part of salary to be paid as transport allowance. Transport allowance is exempt from tax up to Rs 1,600 per month.
- The golden deduction of section 80C – Section 80C lets you knock off Rs 1,50,000 from your total income. It’s really the best possible way to save tax! A lot of investments as well as expenses are eligible for deduction under section 80C. Have a look here. If you are short on funds – the EPF deducted from your salary deducted at 12% of your basic salary can be claimed under section 80C. You can claim payments made towards buying life insurance policy. You can also claim school fees of your children. Want to make investments that go in to 80C? Opening a PPF account is your best bet. You can open a PPF account in most of the nationalized banks and you can do like a SIP in your PPF account. It allows you to make maximum 12 deposits in a year, not exceeding Rs 1,50,000 in total. That makes it deposits of Rs 12,500 per month. Of course you can make a lumpsum payment and that will be more beneficial. If you are willing to expose your risk to equity markets – ELSS will be a good option to invest. Do check the performance of the mutual fund before committing yourself. ELSS also comes with a lock-in of 3 years. If you have a daughter you must consider opening a sukanya samridhi account for her.
- Get health insurance for yourself and your family – Medical expenses are shooting up and you must consider a health insurance for your family. You can get a deduction of Rs 25,000 when you insure yourself, your wife, and your children. You can get additional deduction of Rs 30,000 if you insure your parents as well. This deduction is allowed under section 80D.
- Draw up a spreadsheet of your income and expenses – Even though you are salaried, it will be very helpful for you to start tracking where your money is going. Set aside a certain amount each month which shall go into tax savings, start with 20%. And make a checklist of where your remaining salary is spent. This will help you get in control of your expenses and make you more diligent with savings.
- Match your financial goals with your tax saving – If you dream of putting your finances to buying a home for yourself – find out how you can maximize tax saving if you take a home loan. Not only you are allowed to claim deduction on interest, the principal is allowed to be claimed under section 80C. Are you willing to invest in long term secure products – go for PPF and NSCs and park your savings in them. If your approach is more aggressive, go for ULIPs or tax saving mutual funds. There are many more ways to save tax and you can read about them here.