At the end of the financial year, employees get a reminder call from the accounts department to submit their investment proofs or else their income would be subject to tax. Every professional, who falls in the tax slab, has to pay income tax. However, if you want to cut down on some of the taxes, here are a few tips that would help you to do so.
Exemptions and reimbursements are a good way to save taxes. It is especially helpful for people in the lower income slab as they can almost reduce their income tax to zero with exemptions alone. Some of the expenses that would help you get tax relief are telephone, meal vouchers, etc. Other than this, you can also save taxes through other expenses. Some exemptions which are quite popular and effective are house rent allowance, leave travel allowance and transport allowance.
Under section 80C of deductions, there are a few investments that allow tax rebate. The sum that has been invested gets deducted from a person’s taxable income. Section 80C allows a maximum limit of Rs 1.5 lakhs. These investments are contribution to EPF account, investments in tax saving mutual funds, deposit in PPF accounts, tax saving fixed deposits, National Savings Certificates, and others.
There are also some expenses that are exempted from income tax; however, they should not cross the limit of Rs 1.5 lakh. These expenses are insurance scheme premium, home loan principal payment, and tuition fee for children or self.
Charity is a fine way of helping the needy lead a much better life. However, it is also a useful way to claim income tax rebate. The government allows tax deductions so that more and more people will donate money. So, if you plan to make donation to the PM Relief Fund, political parties, or some notified NGO, then you will get 100 percent tax benefit.
But there are also some donated amounts where only 50 percent of it is eligible for deduction. In order to claim tax rebate, you must provide as a proof of the payment a stamped receipt that has been issued by the trust.
Medical Insurance Deduction
Medical insurance comes in handy when a person falls sick and needs to be hospitalised. However, apart from providing you security, medical insurance is also a good way to save taxes. If you have medical insurance then you can claim deduction, over and above the 1.5 lakh limit.
Apart from this, you can also get tax savings from health checkups. The benefit is available to people on the health insurance premiums that are paid for self, spouse, children and even the parents.