It is already February and soon the financial year 2016-17 will end. By this time you should have better picture of your total gross salary any investment you made or may make before the end of financial year. It is time of year where you should sit down and look into your finances and fine-tune your tax plan. If you have not carried out any tax planning yet, time is running out for you.
Here are few steps which can help you save tax:
- Estimate your total income and tax saving investments for entire year
- Know about available tax exemptions & Benefits
- Do the needful to avail maximum benefit
Estimate your total income and tax saving investments for entire year:
- Calculate what you have earned and what you will earn in remaining month(s) of this year.
- Calculate your investment for tax benefit purpose
- Review your last year tax to get idea of tax structure, available benefits etc
- Also check the due date for filing of return this year
- Verify your Taxes paid and TDS details in Form 26AS with your Form16 or Salary receipt before filing your Income tax return
Know about available tax exemptions & Benefits –
Here are some deductions and exemptions available –
- Get deduction u/s 80 C – up to Rs.1, 50,000 (Investments, LIC, PF, PPF, NSC etc.).
- If Net income (Gross Total Income (less) Deduction) does not exceed Rs.5, 00,000 – then don’t forget to claim relief of Rs. 2000/-under section 87A.
- Invest in National Pension Scheme and get extra deduction of Rs. 50,000/-
- Deduction available u/s 24 in respect of Interest paid on Self Occupied house Property has been extended from Rs.1, 50,000 to Rs 2, 00,000.
- Claim deduction u/s 80TTA( Up to Rs.10,000/- ) Interest received on deposits (not being time deposits) in a savings account held with banks, cooperative banks and post office.
- As per section 80D, Expenditure incurred on preventive health check up of himself/parents/spouse can be deducted.
- Long Term Capital Gain arise on transfer of Listed Equity Shares, Derivatives or equity oriented mutual fund is exempted income. ( It is so because security transaction tax is already charges upon these transaction)
- Following Incomes are exempted from the Payment of Income Tax: agriculture income, dividend on shares, gifts, Interest on PPF, Interest on notified bonds issued by local authorities, Interest received from Public Sector Company or notified bonds or debentures or Mutual fund etc.
- If you total income exceeds Rs.1, 00, 00,000 (1 Crore) then get Marginal Relief Benefit.
- If you are salaried employee and professional tax is deducted by your employer then claim its deduction from salary.
- Donations made to Political Party or Electoral Trust is eligible for deduction u/s 80GGC.
- Cash donation towards registered charitable trust is allowed for deductions if donation amount is less than Rs 10,000.
Do the needful to avail maximum benefit:
Once you know all the available exemptions then figure it out if you are availing to the fullest or not. If your tax saving investment is falling below to maximum limit i.e. Rs. 1.5/2 Lacs then make investment towards tax free instruments which will reduce your tax liability and also fetch you interest income.