Do you know you could save a lot of money if you plan your taxes the right way? The income tax act allows various income tax exemptions for salaried employees which could help you plan and save your taxes. The next time when your salary structure is being planned make sure you consider the following points
National Pension System (NPS): Under the Section 80C of the Income Tax Act you could save a certain amount of money all you need to do is ask your employer to make minor adjustments in your salary structure. The government hives special tax exemption for contribution towards the National Pension System (NPS) by employers on behalf of employees under the corporate model. While the employee contribution up to 10% of basic plus dearness allowance, or DA, is eligible for deduction under Section 80CCD within the Rs 1 lakh limit, the employer’s contribution up to 10% of basic plus DA is eligible for deduction under Section 80CCE over and above the Rs 1 lakh limit. Even the employer can claim tax benefit for its contribution by showing it as business expense in the profit and loss account.
Public Provident Fund: It is the best saving option, it gives you full tax saving with maximum safety. It’s quiet flexible and easy. Anyone can invest in this fund as its easily available in most of the banks. You could save tax on this investment as it comes under Section 80C. The interest paid on this is also tax free moreover the redemption amount is also not taxes such as insurance maturity amount. PPF investment is for 15 years. Normally you can’t redeem it before that. You can take loan before 5 years and withdraw it partially after 5 years
Employee Provident Fund: For the employers in the organized sector it is mandatory to deduct 12% of the employer’s salary towards employee provident fund (EPF). This investment is qualified for tax deduction. You could invest more than 12% and the excess amount will get tax benefit as well. Money being invested in EPF gets tax deduction under Section 80C. Money is locked till your retirement. If you remain unemployed for 2 months then you can withdraw your whole amount. Withdrawing money before 5 year would be taxable. You can withdraw partially in special situations.
Term Insurance: By taking an insurance like life insurance you could avail tax deduction under section 80C of Income-tax Act, 1961 with enhanced tax deduction upto Rs. 1,50,000. From a tax saving perspective all insurance plans are ‘equal’ before the law. So regardless of the life insurance plan, tax-saving is assured. The premiums paid on these policies help avail tax deduction and hence they are some of the important tax saving plans that one must be sure to consider. Though if the premium paid suring the financial year, exceeds 10% of the sum assured, the benefits will be limited upto 10% of the sum assured and if it not exceeds 10% of the sum assured then it can be subjected to premium under tax exemption of Section 10(10D)