Tax Saving Exemptions: The simplest and easiest way to save taxes!

It is yet again that time of the year, when corporates start collecting the tax proofs from their employees. Like every other year, this year too many of us would have scurried and made submissions, in this hurry, one often misses to utilize the tax optimization benefit to the maximum extent.There are few items within your salary stack which enable you to save taxes without shelling out a single penny. These are termed as exemptions and tax free perquisites; here is an overview of the various exemptions/perquisites that one can claim.

Exemptions for Salaried Individuals

Exemptions can go a long way in enabling you to save ample taxes, often one misses to take adequate advantage of these. We take a quick trip across various exemptions that one can claim to reduce taxes significantly.

There was no monetary limit on LTA, the company would levy a limit. 2 trips in a block of 4 Yrs were allowed, for all income tax purposes one uses the FY ending 31^st March, for LTA one would use the Calendar year ending 31^st December. One needs to provide relevant proofs for the trip conducted, wherein route opted for should be the shortest distance and the destination has to be a single place.  Also, one needs to take leave from the company (min 2 days – may vary based on co., policy) for claiming this exemption.

Tax Free Perquisites

Company Car EMI arrangement – The EMI paid towards your Car will be directly reduced thereby reducing your tax liability. Food coupons, petrol / telephone re-imbursements are all items which will reduce your taxability.

Tax-efficient Investments

There are few investments which enable one to earn tax free returns, there are others wherein the returns are taxed, typically at normal rates or special rates depending on the type of instrument in which the investment was made. Returns from avenues such as PPF (public provident fund), ELSS (equity linked savings schemes), Insurance – Traditional / ULIP are tax free; on the other hand investment made in Fixed deposits, Pension plans, Infrastructure bonds are taxable. All the avenues mentioned above qualify for tax deduction. It is pertinent to choose tax efficient avenues and at the same time diversify even whilst planning for tax optimization.

Hope this brief helps you optimize your taxes effectively this time round!

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Regards

Garvit