TTA gives you brief idea on how to save tax and at the same time make proper investment and cover insurance and Medical expenses risk.
1. Investment in 80C for Purpose of taking full benefit of 1.5 Lakhs
Deduction under 80C is related to deduction that an individual can deduct from his gross taxable income in order to reduce his tax liability by investing in specified investment. It is applicable to individuals and HUF. An assessee can get deduction under section 80C upto a maximum of Rs.150000.The qualifying investments and expenditure as deduction under 80C are investment in Insurance Policy, Post Office Time Deposit Account, Investment in Equity Linked Saving Scheme (Mutual Funds), Public Provident Fund, National Saving Certificate (Read Article Why to invest in National Saving Certificate ?), Tuition Fees Paid, Bank Fixed Time Deposit, Repayment of Principal of Housing Loan, SukannyaSamriddhi account, to Read more about Deduction under section 80C of Income Tax Act - Specified investment / Expenses Click here.
2.Investment in National Pension Scheme up to Rs 2 Lakhs
Finance Minister Arun Jaitley in Budget 2015-16 introduced an additional income tax deduction of Rs. 50,000 for contribution to the New Pension Scheme (NPS) under Section 80CCD. NPS is a voluntary pension scheme, which is regulated by the Pension Fund Regulatory and Development Authority.This extra deduction of Rs. 50,000 on NPS will increase the total deduction allowed under Section 80C and 80CCD of Income Tax Act to Rs. 2 lakh. In Budget 2016, the finance minister has made withdrawals from NPS on maturity tax free upto 40% of the total corpus accumulated. Currently, none of the withdrawals were tax-free unlike other competing instruments such as PPF and EPF where the total withdrawal was tax -free. This is a major step towards making the NPS scheme more attractive and bringing it on par with the other EEE pension schemes. The Budget 2016 proposes to provide a uniform tax treatment to the recognised provident fund, national pension system and superannuation fund.
It is proposed that 40% of the pension wealth received by an employee from the National Pension System Trust shall be exempt.
3.Home Loan Interest and House Rent Allowance (up to Rs 2.5 Lakhs or Rs 60 Thousand)
Employees get HRA as a part of Salary. If the Employee is living in rented accommodation they can Claim HRA benefit and save on taxes. If the Employee is staying with parents in that case too they can pay rent to parents and Claim HRA benefit.
4.Tax Free Medical Allowance and Transport Allowance up to Rs 40 Thousand
Medical reimbursement and Transport Reimbursement can be claimed by the employee and it will be taken care in form 16 itself. For Medical Bills Employee needs to submit proof of expenditure incurred.
5.Medical insurance for Self, Parents and Dependents up to Rs 50 Thousand
Payment of premium on life insurance policy and health insurance policy not only gives insurance cover to a taxpayer but also offers certain tax benefits.Medical insurance premium paid by assessee, being individual/HUF by any mode other than cash.Sum paid by assessee, being individual on account of preventive health check-up. Medical expenditure incurred by assessee, being individual/HUF on the health of a very senior citizen person provided that no amount has been paid to effect or to keep in force an insurance on the health of such person. Read More about Income Tax Benefit for taking Life Insurance Policy 80C, Health Insurance 80D, and Expenditure on Medical Treatment 80DD
6.Leave Travel Allowance Up to Rs 25000
An LTA is the remuneration paid by an employer for Employee’s travel in the country, when he is on leave with the family or alone. Amount from LTA is tax free. Section 10(5) of the Income-Tax Act, 1961, which provides for the exemption and outlines the conditions subject to which LTA is exempt.
7.Reimbursement of Expenses for Mobile, Travel, newspaper as actual
Many employers provide reimbursement of Travel Expenses, Mobile and Phone Bill and for News Paper. Employee has to submit proof of expenditure.
8.Meal Coupons up to Rs 10 thousand
Is Food Coupon like Sodexo coupons which are very famous given by employers to employee. Most of time employers and employee are not aware of taxability of food coupon and assume they are exempted.
9.Relief under Section 87A
Budget has increase the relief under section 87A from Rs 2000/- at present to Rs 5000/-. So effectively if taxable income is less then Rs 5 Lakhs an individual can Claim relief of Rs 5000/- in taxes paid. If we consider 10% slab rate it turnout to be Rs 50000/- as additional benefit which can be claimed in this Section
Form the above Picture it is clear that if the Individual plan in proper manner for the year 2016 -17 financial year he can not only save taxes but can also plan an investment in Resident Property if he is not owing one. For Retirement benefit NPS seems to be better option considering current changes in Budget 2016.