Individuals look to save tax through various exemptions and deductions available under the Income Tax Act, 1961. Salaried individuals, in particular, may enjoy numerous such deductions under various sections of the Income Tax Act.
The earlier blog shed light on five tips to save tax for salaried individuals. This blog highlights some additional ways to help you reduce your tax liability.
- 1. Seek benefit of Leave Travel Allowance
In case your salary structure has Leave Travel Allowance as a component, you may avail of tax benefits towards the same. Exemption on Leave Travel Allowance is permitted for the shortest distance from the start point to the farthest point. In case you are traveling by air, you may claim an exemption which is not higher than the economy fare by the shortest route to the destination. It is important to note that you may claim such an exemption only on travel made within India and not internationally.You may avail of such a tax benefit for travel of self, spouse, parents, siblings, and children.
- 2. Utilize food coupons
You may use a portion of your salary to obtain food coupons from your employer. According to the Income Tax Act, food in office premises or through non-transferable paid vouchers is not taxable if it costs INR 50 or less.
- 3. Seek exemption on transport allowance
In case your employer offers transport allowance as a part of your salary, you may avail of exemptions on this component. If not, you may request your employer to structure your salary so that it includes transport allowance. This allowance is provided to fund your expenditure for travel between your office and residence. You may enjoy a deduction of up to INR 1600 a month, under Section 10(14)(ii) and Rule 2BB. Blind individuals may enjoy a higher exemption amount of INR 3200 per month. However from next year this exemption has been absorbed in standard deduction of Rs 40000/-
- 4. Avail of tax benefits on your home loan
You may significantly reduce your tax liability by availing of multiple tax benefits on your home loan. As per Section 24 of the Income Tax Act, you may claim a deduction of up to INR 2 lakh on the interest component of your home loan. This is applicable for interest paid on self-occupied property. There is no limit for claiming interest on let out property. However as per section 71 of income tax you can set of maximum 200000 against any other income other than house property income .You may also enjoy deductions on the principal amount paid. Under Section 80C, a maximum limit of up to INR 1.5 lakh may be claimed. Besides, you may seek deduction on stamp duty and registration charges too.
- 5. Make a smart decision while receiving bonus
Bonus is a part of your income and hence it is taxable in the year you receive it. However, you may be wise and request your employer to push the bonus payment to the next financial year if you anticipate that tax slabs or tax rates will be lowered the subsequent year. You may also declare your investment details on time in order to ensure that your employer does not deduct tax on bonus before crediting the amount to you.
Besides the above stated ways, you may seek health insurance tax benefits on your mediclaim policy. You may consider investing in a health insurance policy to reduce your annual income tax liability. You may seek up to an amount of INR 25000. This health insurance tax exemption may further be extended to INR 30000 in case you are a senior citizen. As per Section 80D, medical insurance tax benefits may be availed up to the amount of premiums paid. You may also seek health insurance tax exemption on the premiums paid towards the medical policy for your dependent parents.
You may consider the aforementioned tips, thereby reducing your tax liability for the financial year. Besides availing of health insurance tax exemption, you may seek deduction under Section 14, HRA component of your salary, and Section 80C, among many others. Doing so will help you save a significant amount towards taxes.