Beginners Dilemma : How to save maximum income tax
If you have started a job and you won’t able to save tax completely then this blog helps you ought to plan your tax completely. I am going to provide the exhaustive set of the instrument to save tax. This Blog is not for financial advice for experts. These are guidelines for the beginner who has just started earning but never know where to park his money or how to save income tax at maximum extent. Though I have mention beginner but this all things remains the same for all. So do remember the thing and save your tax.
Let’s come to point directly How to save maximum tax in the Indian Income tax Scenario.
1. Declare your HRA (house rent allowance) as soon as financial year start.
Maximum HRA is exemption allowed is whichever is minimum from three conditions mentioned below
1. An amount received as HRA from the employer.
2. Actual rent paid less 10% of basic+da.
3.50% of basic+da if you live in a metro is 40%.
As early you declare this here in salary as soon your tax liability gets reduced.
2. Claim your LTA (leave travel allowance) in every LTA block.
You can claim the exemption on cost incurs in travel in India. It includes total travel expense of you and your dependent. Lodging and food expense is cannot be claimed as LTA. There is no maximum cap on this amount but you will get the maximum benefit of 1st class AC train fare. Block is the 4-year time frame in which you can claim LTA twice. The current block is from January 2014 to December 2017. You can carry forward one LTA exemption from two to next block. But it is compulsory to consume that carried exemption in the first year of next block.
3. Consume your Medical allowance.
We get the benefit of medical expense till 15000 rs annually. You can keep preserving medical bills of 15000 rs you can produce this for the medical exemption.
Currently limit of 80C is 150000 rs, there are more than 15 instruments in 80C where one can invest. I will write a separate post for 80C efficient utilization please follow upcoming posts. PPF, LIC policy, life insurance policies are some commonly used instruments of 80C.
5. If still, you have scope to put money for tax saving then you can opt for national pension scheme NPS.
You can get an additional benefit of 50000 rs plus your employer contribution towards your NPS account. Maximum of employer contribution can be 10% of your basic + dearness allowance.
6. If you are first-time equity investor you can use RGESS.
RGESS stands for Rajiv Gandhi equity saving scheme. If you haven’t invested in equity(shares) you can get the benefit of Rajiv Gandhi Equity saving Scheme by purchasing shares of prize 50000 rs, provided your annual income is less than 12 lakhs. Maximum deduction you can get of 50000 rs by investing in equity in one financial year. This exemption is allowed for first three-year of investment.
7. If donated something then use 80G Section.
Donation made toward prescribed fund and Institution qualify for 80G. This is restricted to 10% of your gross annual income.
So no worry for tax. Try to use the maximum of this instrument and save your money.
Disclaimer:This article is specifically written for by considering the Indian Income tax law. If you’re not from India than may these points are not valid for you.
Happy Income Tax Saving!!