With new budget, where the government has aimed to taxing the rich, you still have the chance to make more money that only if you fall under the tax slab of 2 to 5 Lakhs income/year. Here are a few ways, which could help you not only to save tax, but also achieve life goals in time.
Take full benefit of section 80C
Save tax under Section 80C, where an individual can deduct from his gross taxable income in order to reduce his tax liability by investing in specified investment. It is applicable to individuals and HUF. An assessee can get deduction under section 80C upto a maximum of Rs.150000.The qualifying investments and expenditure as deduction under 80C are investment in mutual funds, Insurance Policy, Post Office Time Deposit Account, Public Provident Fund and National Saving Certificate.
Investment in National Pension Scheme (up to Rs 2 Lakhs)
Finance Minister ArunJaitley in Budget 2015-16 introduced an additional income tax deduction of Rs. 50,000 for contribution to the New Pension Scheme (NPS) under Section 80CCD. NPS is a voluntary pension scheme, which is regulated by the Pension Fund Regulatory and Development Authority.This extra deduction of Rs. 50,000 on NPS will increase the total deduction allowed under Section 80C and 80CCD of Income Tax Act to Rs. 2 lakh. In Budget 2016, the finance minister has made withdrawals from NPS on maturity tax free upto 40% of the total corpus accumulated.
House Rent Allowance
Employees get HRA as a part of Salary. If the Employee is living in rented accommodation they can Claim HRA benefit and save tax. If the Employee is staying with parents in that case too they can pay rent to parents and Claim HRA benefit. For employees who don’t get HRA benefits, the FM raised the deduction against house rent from Rs 2,000 per month to Rs 5,000. This would result in tax savings in the range of Rs 3,708 to Rs 12,204, depending on the income slab.
Home Loan Interest
Further in Budget 2016 First time home buyers are entitled to get deduction of Rs 50,000 on interest for loan upto Rs 35 lakh. This additional deduction has been given on interest for loan up to Rs 35 lakh, provided the house value doesn’t exceed Rs 50 lakh. For, the 2016-17 Budget proposes tax relief on interest payment on home loan if the property bought, or under construction, is completed within 5 years from the end of the financial year in which the loan was availed instead of the current 3 years. Assuming a loan of Rs 35 lakh to be paid over 20 years, the annual deduction comes to around Rs 2.5 lakh, including the Rs 2 lakh currently available. At 9%, the interest outgo in the first year would be Rs 3.12 lakh. So, the buyer will save Rs 75,000 if he is in the 30% tax-bracket.
Tax Free Medical Allowance and Transport Allowance
Medical reimbursement and Transport Reimbursement can be claimed by the employee and it will be taken care in form 16 itself. For Medical Bills Employee needs to submit proof of expenditure incurred.
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