Last chance to file returns within due date – H&R Block IndiaSeptember 3, 2015
H&R Block – Tax Saving Tips for Salaried IndividualsOctober 6, 2015
Fresh out of college when a person sets on the path of his / her career, he is on a different plane where he suddenly enjoys complete financial freedom on one hand and an anxiety about how to make the earned money work best for his future. Although initially owing to the low-income scales that he receives, there is not much income tax cutting from the hard-earned money. However a small amount of planning can help in saving a huge amount of taxes in the future. This is especially important for salaried young professionals who climb up the success ladder soon and added income entails more cutting in form of taxes. Saving on taxes is possible and one must start at a very young age to be able to accumulate savings faster.
Some of the ways in which these young professionals can save taxes are as follows:
- Section 80C: An initiative by the government to encourage tax saving habit, Section 80C, Section 80CC and Section 80CCC provide a wide variety of investing options where an amount can be invested into tax saving schemes. As of today, one can invest a maximum amount of 1.5 Lakhs under section 80C and pay taxes for the remainder of their income after the deducting this from total income.
- Home Loans: Those youngsters who are keen on investing in property early stand to gain the advantage of saving on repayment of housing loan. When looking for house it is beneficial for the buyer to avail a home loan so that he can have the benefit on taxes paid under Section 24. The income tax act offers a deduction of interest paid on home loan as deduction under section 24 and also a deduction of principal amount payment under section 80C. Apart from this one may also claim the deduction of stamp duty and registration charges paid under section 80C at the time of booking a property.
- Deduction on rent when one does not receive HRA: If the tax payer has no option of HRA from his employer then under Section 80GG one can claim deduction on the rent paid. This deduction can be claimed strictly when the person does not claim any deduction under section 10 (13) for HRA, he does not own any property in the place of work and even if he owns a property at a place elsewhere then he does not claim it as self-occupied.
- Deduction on Rent paid to parents: Tax can be saved even if the rent is paid to one’s parents under Section 80GG. For example, if Arun stays with his parents and decides to pay them a monthly rent then he may claim this as a deduction under section 80GG. This might act as a nice way to create some savings for your parents and also save you some taxes.
- Deduction under the Rajiv Gandhi Equity Savings Scheme (RGESS): In order to attract many young and interested investors the government has declared this scheme that offers a 50% deduction of the amount invested with a ceiling limit of Rs25,000. The annual income of the person claiming deduction should be less than Rs12 lacs. Hence this is an ideal deduction for young professionals.
- Charity: Under Section 80G, generally, one can avail for tax deduction up to 10% of total taxable income on amounts given in charity or donation. Generally for those young professionals who want to start donating early this is some good news since they can look to save some taxes for these acts of kindness. But depending on the institution to which the contribution has been made, 50% to 100% deduction can also be availed on the amount donated. One has to ensure a receipt from the organization to claim such a benefit.
- Education Loans: Fresh from completing their studies, a lot of young professionals have an education loan to repay. These education loan repayments can be claimed as a deduction from your tax returns. Education loans allow us to reduce our taxable income to the extent of interest paid on the education loan under section 80E.
- Investing through your parents or spouse: Taxes can be saved if we invest through our parents and non-working spouses. In case of money invested in the name of parents there is no clubbing of income as compared to the case in non-working spouses and one can enjoy complete tax deduction. In case of spouse, the clubbing happens only on the first return of income on which tax is to be paid; but the future returns do not hold any clubbing with one’s income and is independent of any taxes to be paid. Hence when the spouse invests the returns earned on amount invested then this income is termed as income of spouse.