Annual Tax Saving Tips : Especially for salaried employees

CMA. Subhash Kumar Jha , Last updated: 16 September 2010  
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Annual Tax Saving Tips : Especially for salaried employees

 

Ideally everyone should plan their tax saving from April onwards but often people tend to forget this matter after submission of their investment declarations to their employers.

 

Often, they only get activated in the month of January to March, when they are actually required to submit the actual investment proof. But till that time the market gets flooded with investment options asking for a sum of 50-60 thousand with temptation of “Tax saving” & more often than not, we follow one of them without going into much detail, because due to short of time our mind often listens to one phrase i.e “tax saver”. Here are some useful tips that can be followed :

 

Tip 1 : The best would be a Systematic Investment Plan (SIP). But if we don’t follow SIP, then we should have at least two savings account. One operative  & the other silent. We should try to put a regular monthly amount into the silent account so that when it actually matters, i.e. the months on January-March, when we are actually required to submit the investment proofs to our employer, we don’t run out of money, resulting revised declaration & paying un-wanted tax.

 

Tip 2 : If we are not able to understand any option then go for 5 year tax saver bank Fixed Deposit or National Savings Certificate.

 

Tip 3 : If we have FDs lying in bank, we should not only look for the maturity or interest income. We must ensure to get the TDS form 16A every year from bank so that we can get benefit from the TDS deducted by the bank, at the time of Income Tax Return.

 

Tip 4 : House Rent Allowance Tax benefit can be availed even if we pay rent to our parents, if the house is in their name.

 

Tip 5 : Home loan benefit under joint ownership with spouse. Tax benefit for interest paid on such joint home loan can be Rs. 150000/- each for both.

 

Often we have multiple credit cards & we are using it often for EMI payment or purchases.

 

Tip 6 : We should ensure that the usage of one Credit Card should not increase Rs. 2Lacs per financial year. We can plan our usage in other Credit cards. Often it leads to IT notices based on the report submitted by Credit Card Agencies’ AIR return & we will feel harassed in actual disposal of these notices.

 


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Published by

CMA. Subhash Kumar Jha
(General Manager - Finance)
Category Income Tax   Report

3 Likes   56454 Views

Comments

02 March 2012 Arjun c

Nice article a good one and most need for tax practitioners


01 March 2012 CA. KAMAL PAWAR

GOOD ONE.........


29 February 2012 Prof. Bajaj

I agree with Subhash Sir's points. Mr. Lapsiwala's Comments are useful in very specific cases. SIP should work the best for tax saving as well as wealth creation in my opinion.


28 December 2010 Soumya

nice tips


24 December 2010 jaymal

good


14 October 2010 jayesh

Mr Lapsiwala, I dont think EPF/PPF are good investment today. better is to go with SIP what Jha told, as in PPF you get 9.5% return and in MF you could get good returs of 15~25% or even more.


24 September 2010 CMA. Subhash Kumar Jha

Mr. Lapsiwala, I admire your valuable suggestions on my tips. Just to clarify.. my tips are not an exhaustive list, there can be many.. Also.. my focus is basically for those who does not have a sound finance (concept) back ground, Therefore, I have made it in the simplest way..


23 September 2010 M. Lapsiwala

Dear Subhash, Good effort but if you do not mind I would like to make a few suggestions. Life is not just about tax planning and since we do not have social security, it is important that each individual creates his own retirement fund. In addition to EPF, an important role can be played by PPF in creating your retirement fund. However, there is no mention of PPF in your planning.


23 September 2010 M. Lapsiwala

Part 2 Regarding Tip No. 1: Your general idea of monthly savings is good but people do not understand Mutual Funds and hence investments in SIPs avoidable. But you can make monthly deposits to your PPF account. Regarding Tip No. 2: Do this only if you have exhausted your EPF and PPF limits.


23 September 2010 M. Lapsiwala

Part 3 Regarding Tip No. 3: I agree with your savings sentiment but it is difficult to get correct certificates from banks. There is usually some mistake in the Form 16 issued by them. Hence it may be best to take interest quarterly so that there is an entry in your bank account and things remain clear.


23 September 2010 M. Lapsiwala

Part 4 Regarding Tip No. 4: Agree but get the documents right. Issue cheques regularly. Also check the rate of tax applicable to the parent who gets the rent. If he has higher income, there is no point in doing this.


23 September 2010 M. Lapsiwala

Part 5 Regarding Tip No. 5: Try to get two loan accounts and this works much better. You will get a separate interest certificate so there will be no worries. I sincerely hope you do not mind my suggestions.


23 September 2010 CMA. Subhash Kumar Jha

Thanks Nandan.. I am happy to make your doubts clear. For contacting me.. I have written a PM to you.


23 September 2010 Ankush Mehta

ENLIGHENED! Thanks a ton :)


22 September 2010 nandan kumar

thank u very much sir for your help to sort out my dilema. i should really admire your patience. i would like to be in contact with u so what should i do.


22 September 2010 CMA. Subhash Kumar Jha

Nandan.... I am forwarding one more link to you. Read it in clear manner. & just confirm to me, whether your doubt is over or not ? http://www.raagvamdatt.com/Advantages-and-disadvantages-of-home-loan-in-joint-names/194/


22 September 2010 CMA. Subhash Kumar Jha

Nandan... There is no separate notification for this, as its a matter of interpretation only.Read in the following link, you will have fairer idea. http://www.indiastudychannel.com/resources/94079-Benefit-Applying-Joint-Home-Loan.aspx


22 September 2010 nandan kumar

but they told me to show the provision in Income Tax Act. he made me to talk with his collegue who is CA. he completly ruled out the point that we cannot claim the same. sir if u would be in my situation how would u convence that person


22 September 2010 nandan kumar

i had an situation where an employee came to me and asked that he had taken joint loan with his spouse who is also working. there interest was around 350000. i told them that they can claim 150000 each in their form 16.


22 September 2010 CMA. Subhash Kumar Jha

Nandan. I am happy to answer your queries. Link given by you,Q2,: "each co-owner,entitled to the deduction individually on account of interest up to a maximum amount of Rs. 1.5 lakh" "INDIVIDUALLY".1.5L cap is for individual, Its not a joint cap.


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