A last minute tax planning guide for salaried employees (Part 1)
Most of the salaried employees might have received a reminder from the HR for submission of proofs of tax saving investments. Are you worried that you have not utilized all the tax saving provisions? Are you staring at a huge tax deduction from March salary?
If you have already made the provisions and investments, then it’s no big deal for you. But in case you are one of the late movers, time has come to make fast moves.
Broadly, there are three ways to ensure that you pay optimal tax; Claiming tax free income, incidental actions that bring tax benefits and finally Investing/saving for tax benefits. Let us explore them in detail.
Claiming tax free income:
All you need to do here is submit documents to the HR and relax. Your tax outflow will automatically get managed. These are applicable for salary components that are tax free in nature. Here is the list of items:
In case you live in a rented apartment and want to make your HRA tax free: Submit 12 month’s rental receipt from owner
For making medical allowance tax free you need to submit medical bills for the year
To make leave travel allowance (LTA) tax free you need to submit travel proofs
For conveyance allowance to be made tax free you need to do nothing to prove. Attending work is good enough we guess!
Incidental actions that bring tax benefits
Here you get benefits for certain positive actions you take in your financial life. Here again all you need to do is submit proofs to claim tax benefits for those actions.
Interest payment on your home loan- this qualifies under section 24
Principal re-payment on your home loan- this qualifies under section 80C tax rebate
Insurance premium receipts paid for the year- this qualifies for section 80C tax rebate
Tuition fee receipt paid for your children if any- this qualifies for section 80C tax rebate
Your side contribution to employee provident fund (no proof to be submitted as the HR already has the records) – this qualifies for section 80C tax rebate
Mediclaim premium receipt- this qualifies for section 80D tax rebate
Parents’ mediclaim premium receipt- this qualifies for section 80D tax rebate
Education loan statement (mentioning the interest component)- this qualifies for section 80E tax rebate
You must be wondering why Insurance is figuring in this incidental category? Primarily, insurance is supposed to be seen in that manner. We discourage buying insurance policies as a tax saving tool. Same with mediclaim.
Click here for Part 2
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