Financial year tax planning should start at the very beginning of the year. When we rush
through these tax saving plans, we tend to make mistakes; big expensive mistakes. This is
why you need a guide to showcase all possible tax saving ideas for future reference.
Starting with the young earners; they need more guidance but they have more potential to
save enough and have more returns. Below are a few simple tax saving investments and tax
breaks which the early earners can use:
- Education loan (section 80E): Certificate of interest paid from the educational
institution is all you need to submit to your employer for proof of the same.
- House rent allowance (HRA) Section 80: Rent agreement in your name and rent
receipts need to be submitted. If you have paid more than 8333/- a month then
you need PAN details of the landlord also to be submitted along with the above.
- Health Insurance: Policy paper copies are sufficient in this case
- Tax break offers through Section 80C:
- Salary below 1.5 lakhs
- ELSS investments
- Employment provident fund (EPS)
- Public provident fund (PPF)
So the first lesson to learn is to understand how your taxes are being calculated. There
are many aspects of income which are taken into consideration when taxes are calculated
by the government. As per income tax laws, your gross total income is the sum of income
received from the following five heads:
Proper retirement planning is necessary in the event you need to cover any long-term
care that you may require later in your life.
- Salary income
- Income from house property
- Profits and gains of business or profession
- Capital gains
- Income from other sources
The basic exemption limit for an individual depends on his/her age as well as his/her
residential status. According to age, resident individual taxpayers are divided into
three categories:
- Resident individuals below the age of 60 years
- Resident senior citizens of age between 60 years and above but below 80 years
- Resident super senior citizens of above 80 years of age
And the exempt happens for the above categories in the following manner:
Income
tax
slabs for resident individual below 60 years of age |
Taxable income slabs |
Income tax rates and cess |
Up to Rs 2.5 Lakhs |
Nil |
Rs 2,50,001 to Rs 5,00,000 |
5% of (Total income minus Rs 2,50,000) + 4% cess |
Rs 5,00,001 to Rs 10,00,000 |
Rs 12,500 + 20% of (Total income minus Rs 5,00,000) + 4% cess |
Rs 10,00,001 and above |
Rs 1,12,500 + 30% of (Total income minus Rs 10,00,000) + 4% cess |
Income
tax
slabs for resident individual between 60 and 80 years of age (Senior
Citizen) |
Taxable income slabs |
Income tax rates and cess |
Up to Rs 3 Lakhs |
Nil |
Rs 3,00,001 to Rs 5,00,000 |
5% of (Total income minus Rs 3,00,000) + 4% cess |
Rs 5,00,001 to Rs 10,00,000 |
Rs 10,000 + 20% of (Total income minus Rs 5,00,000) + 4% cess |
Rs 10,00,001 and above |
Rs 1,10,000 + 30% of (Total income minus Rs 10,00,000) + 4% cess |
Income
tax
slabs for resident individual above 80 years of age (Super Senior Citizen)
|
Taxable income slabs |
Income tax rates and cess |
Up to Rs 5 Lakhs |
Nil |
Rs 5,00,001 to Rs 10,00,000 |
20% of (Total income minus Rs 5,00,000) + 4% cess |
Rs 10,00,001 and above |
Rs 1,00,000 + 30% of (Total income minus Rs 10,00,000) + 4% cess |
So now here are the ways how you can save your hard earned income:
- Section 80C investments:
- Equity linked savings scheme (ELSS)
- National pension scheme (NPS)
- Public provident fund (PPF)
- Senior citizen saving scheme (SCSS)
- Sukanya Samriddhi Yojana
- Unit linked insurance plans (ULIPS)
- Pension Plan
- National savings certificated (NSC)
- Bank fixed deposits
- Section 80D: Medical insurance premiums
- Equity linked savings scheme (ELSS)
- National pension scheme (NPS)
- Public provident fund (PPF)
- Senior citizen saving scheme (SCSS)
- Section 80DD: Expenditure on the health of a disabled person
- Deductions for the expenditure incurred by him on the expenditure of
caring for disabled persons – any dependent
- They can be any member under the Hindu undivided family (HUF) also
- Max deduction upto 75000 per annum
- Section 80EE: Payment of interest on home loan
- Max deduction upto 50000 per annum
- Loan amount should be below 35 lakhs
- Value of house should be below 50 lakhs
Like this there are many other subsections which allow us to claim deductions on various
aspects of payments or investments made. Section 80TTA: Interest on savings account,
Section 80TTB: Interest on deposits with banks, post office, Section 80GGA: Donation to
specify institutions are just a few examples.
If you did your tax-planning in the last minute and have missed out of any of the points
mentioned above, you still have a couple of months left to set things right. And since
these basics remain the same throughout the year, may be you shouldn't wait till the end
of the next fiscal and start in April itself.
References:
/economictimes.indiatimes.com