Tax time is here! Image: Thinkstock
March 31 is almost breathing down the neck. In case you don’t know what we are talking about, it’s the end of the current financial year when your employer takes the liberty to deduct tax at the source. The more you earn, the more will be your deductions. The more intelligent ones (we mean those who understand the monster called tax) would have already notified employers about their investments to get some relief. But then, blame it on our school education system, most of us don’t understand this subject. For, we have been taught about mitochondria as the powerhouse of the cell but we still can't figure out income taxes ourselves. Sigh!
But fret not. T2 Online got Vikram Raichura, co-founder and CEO of INFIN8 Capital, a personal finance aggregation platform, to guide us on saving some bucks on taxes.
"People belonging to the salaried class live under the misconception that they have very few tax saving and investment options. But the fact is that through different allowances, reimbursement schemes and investment solutions they can avail of huge benefits on tax,” says Raichura.
So, if you are still biting your nails about the financial year ending and you not having made a single investment till date, here are a few effective last-minute tax saving hacks that can come in handy:
Buy Medical Insurance
Medical expenses in cases of hospitalisation are skyrocketing. A prudent way to deal with them is opting for medical insurance, which will not only help you tackle unforseen medical emergencies but also save a huge amount of income tax under Section 80D. "Salaried Individuals can secure their medical needs as well as save huge tax by investing in medical insurance. In this case, an individual can claim deduction of maximum Rs 25,000 for any medical insurance purchased for his spouse and children while an additional of Rs 30,000 for his/her parents' medical insurance,” says Raichura.
Tax Benefit Through Rent Payments
Salaried individuals who live in rented accommodations can claim their tax benefit on HRA under Section 80GG. In many organisations, HRA can be fully or partially exempt from tax, depending on the employee’s salary structure. However, in cases, where an individual doesn’t live in a rented accommodation but resides with the family, he/she can avail of the tax benefits by presenting the rent receipts paid to the parents as well.
However, in many cases, house owners refuse to share their PAN details, which is important. Talk this out before you sign on the rent agreement.
Transport Allowance in Salary
This is one component you can ask your HR to include in your salary structure to avail of tax exemption under Section 10(14)(ii). The net pay may remain the same but adding this will give you an edge to save taxes. "Transport Allowance is offered to the employee so as to compensate for their travel from residence to office. A salaried taxpayer can claim up to Rs 1600 per month or Rs 19,200 per annum as exempt from tax," added Raichura.
Save Tax through Medical Bills
You maybe young and generally healthy, with a rare need for medicines. But your parents or near ones need a monthly list of medication. Almost every salaried individual gets medical reimbursements up to Rs 15,000 as part of their Cost to The Company (CTC). Ensure that the medicine bills, doctor’s consultation bills or lab test bills are saved and submitted on time to be able to legally save tax on this amount under Section 17(2).
If you don’t have bills, try getting a preventive health care test done before the year ends, and submit your bills for the same. This will not only save your health but also your pockets.
Invest in Tax-saving Mutual Funds
Mutual Fund investments are a great way to multiply your money as well as save on taxes under Section 80C. However not all Mutual Funds can be trusted for this. There is a set of funds meant for tax saving purpose only. Invest in this after calculating your deductions. You can invest up to Rs 1,50,000 under Section 80C through tax-saving mutual funds.Finally, ensure all the right documents are submitted to the employer on time. And just in case you fail to notify your HR about your last-minute investments now, simply wait till June when tax filing starts and ask a CA to help you out to get the returns successfully.