Individuals can save a lot when it comes to Income Tax in India, if they plan their salary structure and use the full benefits of the income tax exemptions that are granted in India.
Here are some ways in which salaried individuals can save income tax in India:
Negotiate a correct salary structure
To begin with when you take-up a job, make sure you get the right salary structure in place. Your salary component, most be planned in such away that perks are included and help you save tax.
For example, if you use food coupons you can save tax. Food coupons provide tax exemption. You can use up to Rs 2500 per month, which means if you are in the 30 per cent tax bracket, you could save up to Rs 10,000 per year. A person in the 20 per cent tax bracket, can save Rs 6000 on income tax each year.
Similarly, you can opt for a company car and driver. Other ways to save on income tax through a well planned salary structure would be to have leave travel assistance, get uniform expenses reimbursed, medical bills reimbursed and include telephone expenses as part of the salary.
Also make sure that you have included leave travel assistance in your salary break-up. These also qualify for tax exemption at least two times in a block of 4 years.
Use full benefits of Sec 80C
You can save income tax in India by investing in a host of instruments that offer you tax benefits under Sec 80C. These include PPF, ULIPs, ELSS, Bank Saving Fixed Deposits etc. You can save a maximum of Rs 1.5 lakhs per year The limit was enhanced from Rs 1 lakhs earlier to Rs 1.5 lakhs.
House Rent And Tax Exemption
The salary of every individual most certainly includes an element of house rent allowance (HRA). If you are staying in a rented apartment or house and paying rent, you can claim tax deduction under Sec80GG of the Income Tax Act.
Saving income tax on home loans
Home loans are a big way to save income tax in India. In fact, one can save a whopping amount of money through home loans. In the Union Budget 2015-16, Finance Minister Arun Jaitley hiked the limit on deduction on home loan interest under Section 24 to Rs 2 lakhs from Rs 1.5 lakhs earlier. The principal amount also was hiked to Rs 1.5 lakh from the earlier limit of Rs 1 lakh.
Thus the total amount of savings is Rs 3.5 lakh per annum, which is a huge saving.
Take a health insurance policy
Individuals should take a health insurance policy, which would enable them save tax up to Rs 25,000 in case of ordinary citizens and Rs 30,000 in case of senior citizens. So, one can go ahead and take a good health insurance policy.
Rajiv Gandhi Equity Saving Scheme
This was a new scheme launched two years ago. Under this scheme individuals can invest up to Rs 50,000 in approved stocks. The tax benefits are available under Sec 80CG.
However, only first time investors are allowed to invest in this scheme to claim tax benefits.
Tax savings under new pension scheme
You can also claim income tax deduction in the New Pension Scheme, which was launched by Finance Minister Arun Jaitley in last year's Union Budget. NPS is a voluntary pension scheme, which is regulated by the Pension Fund Regulatory and Development Authority.
The amount of tax benefits that India offers is probably second to none. Individuals can claim tax benefits through proper planning and research. You should begin by ensuring a proper tax structure is in place, after which you can plan to save on taxes.