Tax Planning -Exemptions for Salaried Employees
Every citizen is morally and legally bound to pay tax be it sales tax, payroll tax, income tax, capital gains tax, property tax, wealth tax, inheritance tax, so on and so forth. This is because the taxes that people pay to the government are ultimately used to improve public infrastructure. Though every person who pays taxes is aware of this, still seeing the hard-earned money going to the government is something that most people find hard to digest. That is why government has exempted certain investments from taxes so that not only would it provide the taxpayers the satisfaction of putting their money to good use but also would provide the government with money to carry out various social welfare activities. Therefore, before filing an individual tax return or business tax return , it is necessary to do tax planning.
Tax planning is not about evading taxes but avoiding taxes. It is about making the utmost use of the provisions available in Tax Laws to minimize it. Let’s look at some of the significant tax exemptions for salaried employees available as per Indian Tax Laws.
Section 80C
Under this section, taxpayers can claim a maximum of Rs. 1 lakh provided it is invested in any or all of the following:
* Employee Provident Fund (EPF) and Public Provident Fund (PPF)
* Premiums paid towards Life insurance (term insurance as well as endowment plans)
* Pension plans
* Equity-linked savings schemes (ELSS) of mutual funds having a lock-in period of 3 years
* Specified government infrastructure bonds
By investing in specified long-term infrastructure bonds, taxpayers can claim a tax deduction up to Rs 20,000. This tax exemption for infrastructure bonds is in addition to Section 80C.
* Principal paid towards Housing Loan
Under section 80C, principal repayment attracts a deduction up to Rs. 1 lakh while for interest payment tax deduction of Rs. 1.5 lakhs
* National Savings Certificates (NSC) and interest accruals on previous years’ NSCs
Section 80D
Section 80D covers the tax deductions with regard to health insurance policies. As part of this, taxpayers can claim deduction of Rs. 15000 to Rs. 35,000.
Section 80DD
As per this law, any taxpayer or a member of HUF having a dependent relative suffering from any permanent physical disability or mental retardation can claim an amount of Rs 20,000 to Rs. 40,000. Section 80DD covers payments made to LIC’s ‘Jeevan Aadhar’ and UTI’s ‘Special Plan for the Handicapped’.
Other Deductions
Salaried employees can avail tax deductions for Leave Travel Allowance (LTA), House Rent Allowance (HRA), conveyance, education, telephone, petrol and vehicle maintenance if the employer allows.
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