Are you a salaried individual who is discovering a way to save taxes? If yes, then there are various ways and some of them are discussing here. Many tax payers make investments, but they don’t receive any knowledge about various available options. Let’s check out how to reduce tax liability substantially for the salaried people.
If you are on good terms with your HR department, then restructuring your salary is a proficient choice. But invariably it is not possible. Here are some of the methods in Salary Restructuring.
Instead of utilizing your own car, choose the company car to reduce the high taxation. As part of salary use the medical, transportation, education allowances.Instead of lunch allowances use the food coupons because it reduces tax up to Rs 50 per meal.
2. Contribute to an IRA
IRA means Individual Retirement Accounts which are useful to save for retirement in a bright way. In IRA there are two basic methods to save taxes. They are Traditional IRAs and Roth IRAs.
Traditional IRAs : These are retirement accounts which you can receive a tax deduction if you own certain income eligibility requirements. Taxes must given but you can save some by this method. In 2015, full deduct-ability begins to phase out at AGIs (Adjusted Gross Income) of $ 61,000 for singles and $ 98,000 for married couples. The maximum contribution to a Traditional IRA is $ 5,500 per individual. After 50 years old you can contribute up to $6,500.
Roth IRAs : This is another tax retirement account which you can contribute after tax-dollars if you own certain income eligibility requirements. Any profits are tax free then qualified withdrawals are also tax free. In 2015, the maximum contribution is same to as Traditional IRAs . But the eligibility is only for annual Adjusted Gross Income of $116,000 for singles and $ 183,000 for married couples.
3. Utilizing Section 80C
Using Section 80C it offers a maximum discount of up to Rs. 1,00,000. Utilize this section to the fullest available investment options. Some of the more common options are listed below.
- National Saving Certificate
- Life Insurance Premium
- Equity Linked Savings Scheme
- Public Provident Fund
- 5 year fixed deposits with banks and post position.
- Tuition fees paid for children’ s education, up to a maximum of 2 kids.
4. Options beyond 80C
If you are worn out with your limit of Rs. 1,00,000 under Section 80C . Check out few options discussed below.
- Section 80D – If you need a medical insurance for yourself, partner or for your children then there is a deduction of Rs 15,000 and for your aged parents above 65 will get medical insurance of Rs. 20,000.
- Section 80G – Contribution to charitable services and particular funds.
5. House Rent Allowance
Don’t you have a house? Still, you are paying rent, without receiving any HRA from your companionship? Following are some of the claims under Section 80 GG:
Rs 2000 per month25 percent of the total income Rent paid above 10 percent of total income.
But this generalization can be avoided if your family owns a residential accommodation in the location of your office.
6. Tax Saving From Home Loans
If you have knowledge about how to employ your home loan efficiently then you can save an amount of tax. Under Section 80C, offering a deduction up to Rs. 1,00,000 and Rs. 1,50,000 deducted as an interest rate separately under Section 24.
7. Leave Travel Allowance
Utilize your Leave Travel Allowance for your period of leisure which is available twice in a block of four years. If you have been unable to claim the welfare in a specific four year block. Then claim it in the first calendar year of the block. Accordingly, you may be qualified for three exemptions in that block.
8. Tax On Bonus
If you get a bonus from your employer then is fully taxable in the year in which you receive it. Nevertheless request your employer for the chase:
- If you predict tax rates to be thinned to be changed in the subsequent year, check if you could push the bonus payment every year.
- Make your tax investment details well before, to save your employer from deducting tax on bonus.
9. Senior Citizen Saving Schemes
If the senior citizens deposit savings in this scheme and so it provides assured returns. This is single of the best investment options to save tax as they would get quarterly interest. The interest rates are at 9.2% per annul.
10. Tax Saving Bank FD Schemes
This is one of the old and best investment alternative to save income tax under 80C of IT act. The involvement in this scheme is taxable. But the full point of fixed deposit is five years. The interest rates vary between 8.5% to 9.75%.