Regardless of whether it’s your first job or not, the part of duly paying taxes pinches.
If you feel that you’ve been paying an extravagant amount of tax out of your income, then it is likely that you haven’t planned your tax effectively. There are several ways in which you can save money on taxes.
The Income Tax Act of India permits the citizens of the country to put aside deductions where people claim premises at the time of filing their tax returns. Post-Budget, plenty of salaried individuals are left wondering whether the FM(Financial Management) has left them richer or poorer, But concealed in the tangle of provisions are a great deal that can assist you to save a chunk of tax.
Here’s a quick guide for you to know how to pay less taxes and save money:
Long-term capital procurement
Taxpayers can rescue their money on tax via their long terms gains, provided they receive the gain amount by selling types of long-term assets and investing it in any specific instrument afterward. A long terms capital asset would be considered as any asset that has been owned for over the maturity of 3 years.
Money received from Life Insurance policy
The amount from a life insurance policy can be received on maturity or on receiving the claim amount, the amount received is exempt from tax if the premium doesn’t exceed 20% of the insured. This applies to policies before 1 April 2012, the percentage dropped to 15%.
House Rent Allowance
In India, employees are permitted House Rent Allowance(HRA), which is deducted from their income, HRA assists people to save money on taxes as people can claim it under the deductions section. If the total rent of individuals is more than Rs. 1 lakh in a year, then they are obligated to provide evidence such as House Owner’s PAN Card, Lease Agreement, etc. Also, the citizens cannot claim the full HRA amount given by their employer, but the lowest of the following:
50% of basic salary plus DA (if the employee is in Mumbai, Delhi, Chennai, or Kolkata).
40% of basic salary plus DA (if the employee is in another city).
Actual House rent minus 10% of the basic salary plus DA.
Leave travel Concession(LTC)
Your annual holiday within India can get you a tax break. Tax exemption on any reimbursement of your travel expense while on leave is limited to the economy class airfare for the shortest route available to your vacation destination. No exemption is available for expenses such as hotel, local, conveyance, etc, keep the travel bill handy to submit to your account’s department to claim the exemption.
The tax treatment of an employer-provided flat has been illustrated earlier. There can be other dividends also that are available to you. Any such allowance paid by your employer to meet your daily conveyance needs is tax-exempt up to Rs. 1600 monthly.
As we conclude, Reviewing your budget is necessary to check on your progress every month. This helps you not only stick to your personal savings plan but also identify and fix problems quickly. Understanding how to save money may assist you to look for more ways to save and hit your goals quicker and more efficiently.