The salary structure and the tax payment are tailored as per the expenses. If the expenses are fine-tuned then the taxable salary reduces and accordingly one can skip to some extent from the tax brackets. Let us shed light on the topic of tax planning and provide some tips to save tax on those who are in high tax brackets. House rent allowances, home loans, travel allowance, investment on some of the schemes, using the perks and allowances in the right manner and reducing the basic pay with an increase in the incentives are some of the methods how you can reduce your taxable income.
Restructure your salary
Your basic pay is fully taxable so try to reduce the basic pay and increase the incentives. If you have immediate expenses then your basic pay helps you a lot but if you want to reduce your tax then breaks the salary wisely with the help of the employer. Bonus received at the time of festivals is also fully taxable. So, if it is possible to postpone the bonus then talk to your employer for the restructuring of the salary. Lunch allowances are taxable whereas food coupons are not taxable up to 50 per meal.
Plan your Investment wisely
Under 80C the deduction is up to 1,00,000. So, to avail this deduction the investments allowed are the public provident fund, life insurance premium, national savings certificate, and equity-linked savings scheme, 5 years fixed deposits with banks and post office, tuition fees paid subject to a maximum of two children. For medical insurance deduction of 15,000 is allowed with 80D section and 20,000 for the medical insurance of parents above 65 years. Donations are allowed as the deduction under 80G.
Plan your expenses wisely
Under the section 80GG, you can show the HRA if you are not receiving it from your employer. The rent paid is the expense which can be claimed against the salary. 25 percent of the total income, 2000 per month or rent paid over the 10 percent of the total income deducted from the salary before calculating the net income to be taxed. The home loan is deducted from the salary up to a maximum of 1,00,000 under 80C. The interest on a home loan is allowed with a deduction of up to 1,50,000. Leave travel allowance is available for two years once. The travel allowance is carried forward to the next five years and thus there are possibilities to get three exemption if you have not availed the exemption for the last four years. The fifth year the travel allowance is used and the expenses are allowed as a deduction for the three years.