Friday 26 August 2016
Based on your source of income and amount, you will be charged a proportionate amount of income tax by the Government of India. But it is easily possible to restructure your wealth and assets, so that you are taxed less. Tax restructuring and making financial investments for tax saving is perfectly ethical and practiced in countries all over the world by both individuals and corporates. It is also easy - a lot of these tips can be executed on your smartphone or laptop within minutes, and can save you substantial amounts of income. You can either do it yourself or work with a tax advisor or a financial planner.
House Rent Allowance (HRA)
Your salary statement may mention the split between your basic salary and your HRA. If you have your own house, reduce the HRA component as much as possible. But if you stay with your parents, or a landlord, restructure salary to ensure HRA is 50% of basic. You can now show rent receipts (which can be easily and legally generated online). Alternatively, try to pay rent by cheque, or regular online payments so there is a 'paper trail', and present your employer with rent receipts.
You are entitled to a conveyance allowance of minimum Rs 800 a month, that you can use to reduce your tax burden. Similarly, your medical bills can earn you a tax rebate of Rs. 15,000. While conveyance may not require any receipts, medical reimbursement can be covered by receipts of regular checkups, pharmacy receipts, and medical procedures. Request your employer to add these tax-free components to your salary. Also ask your employer for telecom allowances, for which your phone and internet bills are applicable.
The interest you pay on your home loan qualifies for tax rebate under Section 24 of the Income Tax Act. The amount of interest you have paid can be mentioned as a loss in House Property, thereby giving you a lower tax liability. Also, repaying your home loan is applicable under Section 80C for a tax deduction. This includes properties that have been let out, or self-occupied. Ensure that the flat isn't under construction. Interest during this time can be claimed in 5 installments, starting from the financial year in which the builder finishes construction.
Support an NGO
Under Section 80G of the Income Tax Act, you can claim substantial tax rebates when you donate to NGO or donate to charity which is eligible for providing tax deductions. Eligibility is for the amount donated, relevant to Indian residents, Non-Resident Indians, Hindu Undivided Family, and companies. Donations eligible are payments by cheque and in cash. Save The Children, a world leader in child rights is universally known for transparency in donation spending, and invests regularly on programmes to fight child exploitation. The NGO is supported by 43000+ donors, with both one time and consistent, monthly commitments. These go a long way in creating infrastructure and programmes for child rights work.
You may have noticed that donations mentioned in the list of options require you to actually give money away – this also is an investment into not only yours and your family’s future, but into the future of children everywhere. Happy healthy children of today will become the productive individuals of tomorrow, helping India’s economy and social landscape grow better. However, along with donation benefits, you must consider donating without reference to tax saving. The government's acknowledgement of this philanthropic spirit has resulted in this tax benefit. However, ensure that the NGO you are donating to is registered under Societies Registration Act 1860, or a corresponding law, or under section 25 of the Companies Act 1956.