The end of the financial year is here. Tax planning can be a simple exercise for the salaried.
As the financial year comes to an end, it is time for the salaried section to put in place the tax-saving investments. While the remaining two months can be used for making the investments, it gets a lot easier if the employer is provided with all details as it will do away with the task of waiting for refunds. Since most employers expect employees to provide proof of tax saving by the end of January or February, check 5 out if you have completed the tasks.
Rent receipt details
The house rent allowance can turn taxing if employees don't provide details of their rental expenditure. Hence, provide details of rent paid for the past months so that HRA does not become a taxable income.
Details of all tax-saving investmentsSigning up for long-term tax-saving instruments like insurance or pension plans is meaningless if the details are not provided for tax relief. While the task of providing details becomes easy when you opt for salary deduction, the trouble comes when you make these investments on an annual or half-yearly basis. When insurance payments are made through ECS, it is still mandatory to provide the receipt or statement to the employer to get the tax relief.
Keep track of changing guidelines
Income tax regulations, as you are aware, are subject to change. Hence, you need to assess the past investments at regular intervals. A classic example is investments in pension plans which were earlier covered under Section 88CCC. Now they have been brought under Section 80C and the upper limit too has been raised to Rs 1 lakh from Rs 10,000.
Similarly, there have been changes on the health insurance front too with additional relief being provided for premium paid on behalf of senior citizen parents.
Reducing burden from LTA
Leave travel allowance is always a tricky component for young professionals. Since the allowance needs to be claimed (some companies do provide without request), it can skip the attention of many professionals. There are a couple of factors associated with LTA. As the name indicates, the allowance is provided to enable the professional to travel on leave once a year to his native place. Hence, the individual is required to provide details of the travel to claim it.
The other part of the allowance is with respect to income tax. The allowance, as per the IT Act, is tax-free once in two years or twice in a block of four years. So, it is important for the salaried segment to keep track of the year while claiming the tax benefit as it need not be taxed alternate years or twice in a block of four years.
During the remaining two years, the allowance is taxable.
Medical reimbursement
Another expenditure which is not taxed from the point of employee is medical expenditure, up to a limit of Rs 15,000 per annum. Some employers do provide the money if not claimed but then it will become an allowance and hence taxable. Instead, employees can reduce the tax burden by claiming the allowance with the help of medical bills on a monthly or annual basis.
