Top Secrets for Income Tax Planning in Legally permissible ways
No one likes to pay too much of tax on their hard-earned money and thus, tax planning is the essential thing that every taxpayer must do. Income Tax planning is a comprehensive form of tax saving and investing into tax saving instruments to save a big amount of taxable income. Income tax laws have provisioned many deductions against specific investments and they are the legal ways you can approach to save taxes.
Common people are generally scared to go into the complex income tax laws and pay more taxes on their hard-earned money. So this article is written in a simple language about some top secret tax saving expenses for those common taxpayers who finds it difficult to deal with legal documents.
Top Secret Income Tax Planning Tricks For Salaried Individuals:
To start, there are many spending s you make every year which can save a lot of your tax liability. These expenses just need to be declared during income tax filing to claim benefits and a lot of your taxable income will be reduced.
House Rent Payments:
Let’s go through the salary slip you get every month, it will show a component called “HRA” which is the second largest component of your salary after basic pay. HRA stands for House Rent Allowance which is totally tax-free and you can claim a tax deduction against this amount. This deduction is provisioned under Section 80GG of Income Tax Act.
This deduction is applicable only if you are staying in a rented place and do not own a house property at all. If you are staying at your parent’s house and pay rent to them, then also you can claim this deduction by showing appropriate rent receipts. If you own a house but you are staying in a different city/village at a rented accommodation due to your job then also you can claim this deduction.
Tuition Fees Payment:
You must pay a good amount of money to educate your child but did you know that the amount you pay for tuition fees is exempted from tax liability. You can avail deduction up to a limit of INR 1.5 lakhs every year by producing accurate receipts. One individual can apply for this benefits for up to 2 children, so if both of the couples are earning than they can claim a deduction for 4 children and each of them can avail the amount up to 1.5 lakhs.
However, the deduction is available only for tuition fees you paid in any government institution or any registered private institution. No capitation fees or donation or development fees can be used to claim this deduction mentioned under Section 80 GG of IT Act.
Spending money on buying medicines may not seem very fortunate to anyone but the good thing is these expenses are tax-free. To claim this, you need to save all your medical bills and at the end of the tax year, you can claim a deduction up to INR 15,000 by producing these bills.
Also, any investments you made on medical insurance or preventive health check-ups can get you deduction up to INR 60,000 on your annual taxable income. To avail this deduction, you need to show proofs of payments which must not be made in cash.
The other expense that can avail deduction on your taxable income is Leave Travel Allowance. In your salary slip, you can find a section called travel allowance which is given by your employer to cover your travel expenses for coming to work from home. This amount is tax-free and you can claim benefit for this amount to decrease your tax liability on total salary. Also, you can claim LTA benefits for up to 2 trips in a period of 4 years. The trip must be done by you or with your family. The expenses you made during this trip can be claimed for availing deduction on the total taxable amount.
House Loan Repayment
Under Section 24, it is provisioned that one can get tax deduction against home loan EMIs or principal repayment. To avail this deduction, you need to make sure that the home bought is your only house property.
Under Section 24, it is provisioned that one can also claim a deduction against education loan and EMIs that they have taken for higher education of their children or spouse or self there is no upper limit provisioned for this deduction and you can claim a deduction for the interest you pay and it must not exceed the amount of your taxable income.
Meal coupons, telephone and internet expenses
If your employer issue any meal coupon such as Sodexo than those expenses are not taxable up to a limit of INR 2,600 per month.
If your company provides you allowances to maintain your telephone/internet expenses then that amount will not be taxable. You can claim benefit against those expenses while filing income tax return.
Top Secret Tax Saving Expenses For Business Persons:
There are many expenses that a business person make on regular basis can avail deduction on their taxable income. These expenses need to be produced at the time of income tax filing and you can claim a deduction against them on your total taxable income.
Profit Distributed among Partners of Partnership Firms
If you are doing business in a partnership firm then your firm must pay taxes on the profit generated every year. So, if you and your partner share the profit among yourselves then you don’t have to pay taxes individually as this money is already been taxed under your business tax liability. In such case, business partners get tax benefits on their received income.
Business Travel Expenses:
Business owners always make trips to due to business needs and the best thing is they can claim benefit against these expenses. They can get tax benefit on the travel and hotel expenses they made during the business trips. To claim benefit, they must need to make these expenses from company account instead of their salary. Doing such can get you the opportunity to claim tax benefit by showing these expenses at the time of tax filing.
If you are a business owner then you must meet many people such as customers or vendors on daily basis due to business needs. If you pay for their food bills during the meeting then you can show these expenses to decrease your business’s taxable income.
So, now you know that many common expenses you make on regular basis can be your secret tax saving weapons. To claim all these deductions, you need to show appropriate proof of these expenses while filing income tax return next time.
I am Shreya Dey, have an experience of 5+ years in financial writing and currently writing for allindiaitr.com. All India ITR is an online tax intermediary providing e-filing tax services for individual and business taxpayers. My passion for writing financial topics is committed to write accurate, precise, unique and well-ordered writing pieces.