A lot of times, we do not realise that as salaried professionals, we could lose out a lot of benefits due to ignorance. We end up paying more tax to the government than what is necessary. Here are a few ways in which we can save our taxes and improve ourselves financially:
1) Section 80C
If you are invested in schemes like ELSS mutual funds, Provident funds, premium life insurance, home loan principle repayment etc. you can file for IT returns up to 1.5 Lakh per year, as per as Section 80C.
If you purchase a medical insurance for yourself, your spouse or children your insurance amount will be tax exempt. This is availed under section 80D. For health insurance on your family, you can claim up to 25,000 but if you purchase one your parents, you can claim up to 30,000. Medical insurances secure your health and your family's health while providing your tax exemption on the year your purchase the policy.
3) Leave Travel Allowance
The Leave Travel Allowance is not mandatory and is applicable only if your employer has included LTA in your pay structure. If you have taken a vacation/trip within India, you can submit the bills and avail tax exemptions on the same.
If you are a salaried professional who lives in a rented house, you can claim tax benefit on the house rent allowance. If you are an adult living with your parents, HRA can be claimed still as long as your parents include your rental income in their tax returns. In case you receive an HRA but you don't live in a rented house, then the allowance will be taxed.
5) House loans
Under sections 80C, 80E and 24B, deductions are allowed for individuals who are repaying the principal of a home loan or the interest, depending on various terms and conditions. First time home owners can avail a tax deduction on their new property.
Any individual who has taken loan for higher education can avail for exemption on the repayment under section 80D.
7) Low income
If you are an individual who learns less than 50000 per year, you are excused from paying taxes, according to the 2016 year budget. In some cases, the tax is deducted at source for many such people. If that's the case, you can file for ITR and have your money reimbursed.
8) Rajiv Gandhi equity saving scheme
The RGESS is a savings scheme that was introduced in 2012. It aims to encourage small investors and investors whose income is less than 12 lakhs per year to invest in the domestic market. Individuals who invest under this scheme can avail 25000 on investments made up to 50000.
Under Section 80CCD, individuals claim up to an additional 50000 on investments made in the NPS. In addition, the employer's contribution to the basic salary up to 10% is also tax exempt.
10) Encash your leaves
If your employment has the option to encash leaves, then make the best use of it. But this can be availed only during resignation or retirement. You can avail up to 3 Lakhs on leave encashment.