Salary Income-plan

Maximising your tax saving

 

1. Exemptions/reimbursementsIdentify the reimbursements available from the company and take maximum advantage of the same. Normal expenses that one incurs could help save tax. Example: Telephone/fuel reimbursements, meal vouchers and company car. A person in lower tax slabs can reduce his tax liability to nil with exemptions alone!

 

 

2. Deductions

Section 80C allows a maximum limit of Rs 1 lakh across investments ranging from provident fund, PPF, infrastructure bonds, fixed deposits (5 years or more), NSC, insurance/pension plans, unit linked insurance, equity linked savings scheme etc. It also includes tuition fees of your children and the repayment of principal on your housing loan. The interest component on your home loan has a separate limit of Rs 1.5 lakh. Medical premia upto a maximum of Rs 15,000 qualifies for deduction, with an additional Rs 15,000 for parents.

Start early so that you can do an effective financial plan, along with tax savings and evaluate various investment options.

Some tax savings do not require you to invest, take full advantage of them.

Understand your long-term financial goals, this is the starting point.

Hedge your health/life risks.

You can claim a separate deduction for medical premium of your parents. Understand time frame for contributions, and lock-in periods for investments.

EXEMPTIONS

House Rent Allowance
Minimum of – 1. Actual HRA 2. Rent Paid – 10% of Basic 3. 40a% of Basic (Non-Metros) or 50% of Basic (Metros)

Conveyance Allowance
Rs 800 / Month

Leave Travel Allowance
Two trips in a block of 4 Yrs Amount not exceeding Air Economy or Rail AC I Fare shall be for shortest distance and for a single destination

Medical Reimbursement
Rs 15,000 / Annum

 

A new section 80CCF in the Income-tax Act to provide that subscripttion during the financial year 2010-11 made to long-term infrastructure bonds (as may be notified by the Central Government), to the extent of Rs. 20,000, shall be allowed as deduction in computing the income of an individual or a Hindu undivided family. This deduction will be over and above the existing overall limit of tax deduction on saving of upto Rs.1 lakh under section 80C, 80CCC and 80CCD of the Act.