People are always concerned about
the Tax and Tax related issues. They don’t like to pay huge amount every year
as income tax to the government instead search for alternative ways to save
tax. Is
there any way to save Tax? Yes, there are many ways to reduce the Tax burden.
In this article we are going to discuss about the Tax saving Strategies after
the Budget 2011.
Highlights of Union Budget 2011
1.
The basic tax exemption limit has
been increased to Rs 1,80,000 which will provide tax relief of Rs 2,060 to all
tax brackets.
2.
For senior citizen the exemption
limit has been increased from Rs. 2,40,000 to Rs. 2,50,000/-
3.
For senior citizen the qualifying
age reduced from 65 years to 60 years.
4.
New tax slab for senior citizens of
over 80 years in age (Super Seniors) who will not be required to pay taxes for
income upto Rs 5,00,000
5.
The Rs 20,000 exemption limit for
investments into Infra bonds continues for this year also
6.
The Govt. is also thinking of doing
away with the requirement of filing returns if salary is your only source of
income and TDS is being deducted.
Ways to save Tax
Following are the ways to save tax
after the budget 2011. There are so many sections which will help you to save
tax in different ways. Here we are trying to point out some of the techniques
to save tax.
·
Restructuring of Salary
·
Section 80C
·
Medical insurance
·
Medical Treatment
·
Infrastructure bonds
·
Donations
·
House Rent Allowance
·
Home Loans
·
Leave Travel Allowance
·
Tax on Bonus
Restructuring of
Salary
Restructuring of your salary may not
be possible always. But if your company permits, or if you are on good terms
with your HR department, restructuring a few components of your salary could
really help in reducing your tax liability. Following are the components which
should include in your salary.
·
Food coupons
·
Medical allowance
·
Transport allowance
·
Education allowance
·
Uniform expenses (if any)
·
Telephone expenses
·
Company Cab
Food coupons are exempt from tax up
to Rs 60,000 p.a. So opt for food coupons instead of lunch allowances. Opting
for the company car instead of using your own car will help you to reduce high
prerequisite taxation.
Produce bills of actual expenses
incurred for all these allowances to reduce tax.
Section 80C
Section 80C offers a maximum
deduction up to Rs. 1, 00,000. You can avail this benefit by investing in
different investment options. Utilize this section to the fullest by investing
in any of the available investment options. A few of the investments are as
follows.
·
Public Provident Fund
·
Employee Provident Fund (EPF)
·
Life Insurance Premium
·
Unit Linked Insurance Plans (ULIPs)
·
Equity Linked Savings Scheme
·
National Savings Certificate
·
5 year fixed deposits with banks and
post office.
·
Home Loan principal repayment
·
Tuition fees paid for children’s
education, up to a maximum of 2 children.
Deductions: Upto Rs. 1,00,000
Infrastructure Bonds (Section 80CCF)
In addition to the Rs 1,00,000
deduction under 80C, a deduction of Rs 20,000 is also available for investments
in notified Infrastructure Bonds
Deductions: Upto Rs. 20,000
Medical Insurance (Section 80D)
By taking medical insurance for you,
your spouse/ children and parents, you can avail tax benefit. For medical
insurance of self spouse and dependent children you can avail a deduction up to
Rs. 15,000. If you are taking medical insurance for your parents above 65 years
you will get deduction upto Rs. 20,000.
Deductions: Upto Rs. 35,000
Medical Treatment(Section 80DD)
Amount spent for the medical
treatment of dependents with a disability qualify for tax benefits under
Section 80DD. In this case, deductions up to Rs. 50,000 or 75.000 can be
claimed based on the importance.
Deductions: Upto Rs. 75,000
Donations(Section 80G)
Donations to specified funds or
charitable institutions
Deductions: There is no upper Limit
House Rent Allowance (Section 80GG)
Are you paying rent, you can get
deduction on house rent paid even if you are not receiving any HRA (House Rent
Allowance). The least of the following could be claimed as deduction under Section 80GG :-
·
25% of the total income or,
·
Rs 2,000 per month or,
·
Excess of rent paid over 10% of
total income
·
This deduction will however not be allowed, if you, your spouse or minor child owns a residential accommodation in the location where you reside or perform office duties.
This deduction will however not be allowed, if you, your spouse or minor child owns a residential accommodation in the location where you reside or perform office duties.
·
If HRA forms part of your salary,
then the minimum of the following three is available as exemption.
·
The actual HRA received from your
employer
·
The actual rent paid by you for the
house, minus 10% of your salary (this includes basic + dearness allowance, if
any)
·
50% of your basic salary (for a
metro) or 40% of your basic salary (for non-metro).
Home Loans (Section 24)
You can use your home loan
efficiently to save income tax. The principal component of your loan, is
included under Section 80C, offering a deduction up to Rs. 1, 00,000.
At the
same time the interest portion offers a deduction up to Rs. 1, 50,000 separately
under Section 24.
Leave Travel Allowance
(Section 10(5))
Use your (LTA) Leave Travel
Allowance for your holidays, which is available twice in a block of four years.
In case you have been unable to claim the benefit in a particular 4 year block,
you could now carry forward one journey to the succeeding block and claim it in
the first calendar year of that block. Thus, you may be eligible for three
exemptions in that block.
We will see few more tax saving strategies in further articles. As DTC is going to change some clauses these may change. Will update it accordingly. Till then any comments are welcome.
We will see few more tax saving strategies in further articles. As DTC is going to change some clauses these may change. Will update it accordingly. Till then any comments are welcome.