- By making investments in select financial products and claiming deductions under certain allowances, one can reduce the taxable income
- Deductions can be claimed on spends under life insurance premium paid, school fees, contribution to EPF, PPF, NSC, investments in ELSS, NPS
- Claiming the entire Rs 1.5 lakh deduction available under section 80C can reduce tax outgo by Rs 45,000.
- Some additional ways to reduce taxable incomes are by claiming Tax Exemption on Car Allowances, Medical bills, Rent Payment, Food Coupons and Leave Travel Allowance
Mention tax savings and one will start thinking of the Section 80C benefits which add up to Rs 1.5 lakh in a financial year and many would stop just with that. However, there are other ways also to claim tax benefits and reduce your tax outgo every financial year.
Conveyance allowance: You can get your salary structured in such a way that your company will provide you transport allowance. Company offers car expenses reimbursement to its employees if these expenses are incurred for official duties. Car allowance income tax liability, when owned by the employee, is based on the purpose of use: private, official or both. If the cubic capacity of the car is below 1,600CC, expenses for use of the car are considered at the rate of Rs 1,800 a month or Rs 21,600 annually.
Medical bills: Most salaried people get medical reimbursements of Rs 15,000 as part of their cost-to-company (CTC). You can do so by submitting doctor consultation, medicine bills, including bills generated towards diagnostics and tests and avoid tax on this amount. Remember to submit bills on time to your employer, since this tax benefit can be claimed only through your employer.
Rent payment: You can claim HRA if you are paying rent and living in a rented accommodation. HRA can be fully or partially exempt from tax. If you don't live in a rented accommodation but still get house rent allowance, the allowance will be fully taxable. HRA exemption is also available if you live with parents, you can pay them rent. But your parents must include this rental income in their tax return. Don't worry if you could not submit rent receipts to your employer in time, claim HRA exemption at the time of filing your tax return. Do remember to keep rent receipts safely and maintain details of payments made towards rent.
It is always a good time to start planning towards tax savings for the financial year than hurry up towards the end
Food coupons: These days, some employers also provide food coupons as part of your salary, which are exempt up to Rs 55 per day. Every month this can be claimed for about 22 working days and for up to two meals a day, which adds up to Rs 26,400 annually.
Leave Travel Allowance: LTA or Leave Travel Allowance can be used to save tax on fare expenses for a trip made within India. LTA is not a mandatory benefit. Your employer decides your pay structure, which may or may not include LTA. Exemption on LTA is the fare for the shortest distance between two places. It is allowed for the shortest route from the start point to the farthest point reached. In the case of travel by air, the exemption should not be more than economy fare of Air India by the shortest route to the destination. This tax benefit can only be claimed via your employer so remember to submit LTA bills on time. Two journeys can be claimed in a block of 4 years and we are currently in the 1st Jan 2014 to 31st Dec 2017 block.
Section 80C deduction: Claiming the entire Rs 1.5 lakh deduction available under section 80C can reduce your tax outgo by Rs 45,000, for those at the 30% highest tax bracket, excluding the cess. You could claim deduction on savings, investments and spends under life insurance premium paid, school fees, contribution to EPF, PPF, NSC, investments in ELSS, NPS. You can even claim principal repayment towards your home loan.
Medical insurance: You could purchase a medical insurance to secure yourself, your spouse and your children and claim a deduction of maximum Rs 25,000. This is allowed under Section 80D. You can also secure your parents and claim additional Rs 30,000 for their insurance. If you purchase a policy, the entire premium can be claimed under Section 80D in FY 2017 - 18 itself.