As the financial year draws to a close, many tax payers, thinking that they are paying excess tax, will make last minute investments to minimize taxes but without adequate knowledge.
Apart from Section 80C of the Income Tax Act, under which an individual can claim tax deductions of up to Rs.1 lakh, there are other avenues that offer additional tax relief to individuals. Mentioned below are some smart tips to reduce taxes:
This is possible if your company permits or if you are on good terms with the HR department. Talk to your employer and ask to restructure your pay. Restructuring a few components like opting for food coupons instead of lunch allowances, including medical allowance, transport allowance, education allowance, etc. as a part of salary can reduce your tax liability.
Utilising Section 80C
Making the most of this section by investing in options like Public Provident Fund, Life Insurance Premium, National Savings Certificate, Equity Linked Savings Scheme, five-year fixed deposits with banks and post office, etc. will play a vital role in saving you some money.
Paying rent to your parents
If you are living with your parents, you can pay them rent to benefit from House Rent Allowance exemption. However, this is possible only if the property is registered in the name of your parents and it is advisable that an official agreement is prepared and you pay the rent every month by cheque.
Charity and donations
Be it a noble cause or a political party, charities and donations can help you save big. Under Section 80G, charitable contributions are deductible up to 10 per cent of your income and depending upon the
institution to which the donation is being made, the deduction can be either 100 per cent or 50 per cent of the amount donated. Similarly, if you have contributed any amount to a recognised political party,
you are eligible to claim a tax deduction ranging from 50 per cent to 100 per cent of the amount.
Have someone ill to look after
Taking care of an ill family member can wreak havoc on your savings and earnings. Therefore, a deduction of Rs 40,000 (Rs 60,000 if the dependent is a senior citizen) per year, under Section 80DDB is
allowed by the IT department. Dependents include siblings, children, parents and spouses.
The diseases and disorders include neurological complications, haematological disorders, chronic kidney failure, and a few more. However, it is important that the patient is dependent on the taxpayer, and must have not filed for a deduction separately.