It is end of the financial year – that means all clients expect some sensational tax saving plan from us even when we have done this exercise during plan review. No matter what income bracket one is in, tax saving always comes toward the end. If tax planning starts early, a lot can be done especially things like salary restructuring so that taxpayer end up paying lesser taxes. But let me not dampen your spirits any further; we do have some excellent tax saving tips even now. (But this year you should stick with basic things – may be new government can bring some drastic changes in taxation system)
Spent More than Save Some
Do submit following details to your employer or tax planner to save taxes on the expenses incurred during the course of the year.
- Rent paid till March (for employees with HRA component)
- House loan details including Interest and Principal
- Tuition fees for maximum of two children
- Loan on higher education including your spouse or children or any other child for whom you are guardian.
- Unclaimed expenditures on treatment of certain diseases (taxpayer & dependents only)
Save, Invest and Donate to reduce Income Tax
Additionally you can invest for long term goals (never invest in Insurance), participate in saving schemes or donate for charity to save taxes. The following table indicates what can be done to save taxes further.
|Investments -Section 80 C||Applies to: Individual, Hindu Undivided Family (Non Resident Indians also)|
|Maximum deduction Allowed: 1 Lakh|
|Can Invest in|
|We like ELSS better, even though this is a risky/volatile investment – as these schemes invest heavily in equity or equity linked products. The beauty of the product lies in the fact that dividends received and long term capital gains(profits from sale of ELSS after one year) are non taxable.|
|Donations for social causes – Section 80 G||Applies to: All taxpayers|
|Deductions Allowed : 100% or 50% with no upper limit|
|If you have always wanted to donate for various social causes, please do so to the government specified funds to save taxes.|
Donation to Political Parties: “The entire amount donated by an individual to a recognised political party is allowed as deduction under Section 80GGC of the Income-Tax Act while computing her gross total income” Through cheque not cash 😉
|Medical Insurance Benefit -Section 80 D||Applies to: Resident Indians only|
|Maximum deduction Allowed: Rs 40000|
|Exemptions on Long term Capital Gains – Section 54||Applies to: Individual (NRI’s also)|
|It is relevant only if you had an unusual gain in this financial year because of property or asset sale (residential property). The following exemptions apply only if asset is held for more than three years.|
|Do the following to save taxes on long term capital gains|
Saving taxes is not the sole criteria for investments, savings and donations. Make a wise decision keeping your financial goals in mind. Tried to keep the article simple as too many calculations may keep you away from tax saving. Feel free to add your inputs and queries to our comments section.