Saving Income Tax in 2018-19

Parting with your hard-earned money through taxes pinches your pocket. Therefore, you may seek to reduce your tax liability by taking advantage of numerous exemptions and deductions allowed under the Income Tax Act, 1961.

Following is a list of five tax-saving tips for the financial year 2018-19.

1.Restructure your salary

Restructure your salary in case your employer lets you do so. For instance, opt for food coupons as there is an exemption of INR 50 per meal. You may also include telephone expenses, transport allowance, education allowance, medical allowance, and uniform expenses, as a part of your salary, and avoid taxes on them by producing the actual bills at the end of the financial year.

2.Avail of deductions under Section 80C

Section 80C of the Income Tax Act allows deductions up to INR 1.5 lakhs on numerous investment instruments. This includes investments made in public provident fund (PPF), National Saving Certificate (NSC), Unit-Linked Insurance Plan (ULIP), home loan repayment, tuition fees, and mutual funds, among many others. Ensure you benefit from these exemptions and reduce your tax liability.

3.Look out for tax-saving opportunities beyond Section 80C

In case you have exhausted your limit of INR 1.5 lakhs under Section 80C, you may explore other options. For instance, you may purchase medical insurance for yourself, spouse, children, and parents and enjoy tax benefits under Section 80D. Besides, you may also consider making donations to charitable institutions and specified funds in order to avail of income tax benefit under Section 80G. Similarly, if you are running an education loan for higher studies, you may claim benefits under Section 80E.

4.Claim tax benefit on rent paid

In case you are a salaried individual living on rent, you may claim tax benefit on your House Rent Allowance (HRA). You may avail of a tax exemption on the lowest of the following three:

• Actual HRA received from your employer
• Actual rent amount paid minus 10% of your salary;
• 50% of your basic salary in case you reside in a metropolitan area or 40% of your basic salary if you live in a non-metro area

5.Make your investment declaration on time

Most employers ask employees to make their investment declaration during the months of December or January. Remember to declare all investments that you have made in the past financial year. Doing this on time will help your employer get a clear picture of your taxable income so that they may deduct the appropriate amount of tax accordingly.

In addition to the aforementioned tips, you may also acquire an in-depth knowledge of the income tax slabs A.Y. 2018-19. Individuals with a taxable income of up to INR 2.5 lakhs do not have to pay tax. Those in the slab of INR 2.5 - 5 lakhs pay tax at the rate of 5%, while those falling under the taxable slab of INR 5 - 10 lakh will pay tax at the rate of 20%. Individuals with taxable income above INR 10 lakhs are taxed at the rate of 30%. Keep the income tax slabs in mind and be a well-informed taxpayer.