- Read up the tax rules for the current financial year and figure out which tax slab you are in.
- Equip yourself with adequate knowledge on how you can save taxes.
- Start investing in from day one so that there is a nice corpus when you hit your 50s and save taxes along your investing journey.
As you start your long and hopefully successful career, here are a few pieces of advice to you as a taxpayer. These can also help you save a substantial sum in tax..
First and foremost, you must get a Permanent Account Number from the Income Tax department.
Next, relax. All your salary will not be taxed. Figure out which tax slab you are in.
If you have recently received a job offer from your company, then share your prospective salary details with your tax advisor. She will guide you on negotiating your salary under various heads. Some salary heads will make you pay taxes excessively. If you do proper research on all those heads, you may be able to find ways to save tax. You can invest these tax savings for better wealth creation.
Nobody will advise you to buy life insurance and health insurance before you start working. However, for a bread winner of the family, buying these products bring a lot of advantages. First of all, a life insurance policy not only gives your family a cover against your untimely demise. If you have a health insurance policy then you do not have to worry about paying excessively on your medicine and healthcare costs. Tax wise, both these products help you save money on taxes too.
Look for ways to save taxes
Planning to buy a house? It may be too early to buy a house at the beginning of your career, but it always helps to know how buying a house can help you save on taxes. Yes, the Government of India helps you save money if you are paying interest and/ or principal on your house. A caveat- please consult your advisor on the finer points of this tax benefit.
Are you a tenant? If yes, then here is a piece of good news. Tenants can save taxes up to a certain limit according to the Income Tax authorities. Check with your tax advisor to know more. Important- please keep all your House Rent Receipts in the event that the tax authorities would like to check your tax claims.
Medical bills can be reimbursed as part of pay structure, to lower your taxable income. The recent budget has announced a standard deduction of Rs 40,000 for salaried taxpayers. This will be in lieu of the existing transport allowance and medical expense reimbursement. Further, vacation bills and transport allowances have their tax benefits too. Do take note of these. You can claim tax deduction on school fees, education loan, charities, and so on. Equip yourself with adequate knowledge on how you can save taxes.
Plan long term
Even if you are in your 20s, you must begin thinking in terms of your retirement years. Start investing in from day one so that there is a nice corpus when you hit your 50s. You also save taxes along theway. Several wealth creating avenues offer the benefit of tax- saving too. ULIP is one such offering that blends insurance and investment, while helping you save taxes along the way.
Check with your tax advisor about the ways and means by which you can save tax.