The month of January is also very important for salaried employees. Actually, this is an opportunity to submit documents of investments made to save tax in the concerned financial year. At the beginning of every financial year, i.e. in April, companies ask their employees to declare their proposed investments. Besides, you also have to tell which tax regime you have to choose – the old tax system or the new simpler tax regime.
According to Finance Ministry data, 72 percent taxpayers have already opted for the new tax regime in the financial year 2023-24. However, instead of working on tax planning at the last moment, the process should be started from April. However, many people do the same thing every year. Sudhir Kaushik, co-founder of tax consultancy firm TaxSpanner.com, said, ‘To avail maximum benefit of tax exemption, taxpayers should plan in advance. While on one hand the government is encouraging the new tax regime, on the other hand it is also true that the old structure promotes the discipline of saving and thus contributes significantly to the target based planning of taxpayers.
We are telling you about 5 tax saving options, which will help you achieve your financial goals:
Private sector employees who contribute 10% of their basic salary and DA to the National Pension System (NPS) can avail deduction under Section 80 CCD (1) of the Income Tax Act under the old regime. Apart from this, under NPS you can avail tax exemption under Section 80 CCD (1B).
PF, Home Loan Principal
Despite increasing financial literacy, many employees take investment decisions at the last moment. A decision to invest within the limit of Rs 1.5 lakh without thinking can prove costly. Under this, you will invest in such instruments which will not have liquidity before maturity. For example, the lock-in period of Equity Linked Savings Scheme (ELSS) is 3 years. Kaushik said, ‘Under this section, there is a provision for tax exemption on employees’ Provident Fund (PF) contributions also. Additionally, this facility is also available on repayment of home loan principal amount. Despite this, many taxpayers ignore it.
child’s tuition fees
To avail tax exemption on tuition fees, you just need to save a copy of your child’s fees. Under Section 80C, you can avail exemption on school/college fees up to Rs 1.5 lakh per year for 2 children. Additionally, if Rs 2.5 lakh tuition fees has been paid, the wife can claim tax exemption up to Rs 1.5 lakh and the husband can claim tax exemption up to Rs 1 lakh.
Medical expenses for senior citizens
Under Section 80D, senior citizen health can declare a rebate of up to Rs 50,000 on insurance premium and medical expenses during a financial year. Also, if their children also spend this amount, they can also claim exemption.
Tax saving with the help of employer
You can reduce your tax liability through reimbursement, salary restructuring. For example, if an employer provides a car to an employee for personal or official use, it is taxed at a cheaper rate.
Choose your tax regime carefully
Most employers do not allow a choice of tax regime during the relevant financial year. Generally this decision is taken only in April. However, you can change this option in July while filing returns.