Just one month left to beat the taxman

Just a month for financial year 2016–17 to end. We hope all your tax saving investments are in order by now — if not, no worries, we’ve got you covered. Here’s a quick guide to tax saving avenues you can look at.

Salary based reimbursements / exemptions

Conveyance / Transport Allowance

– component of salary when employer does not provide transport to/from office
 — upto Rs. 1,600 per month (Rs. 19,200) is exempt from tax

House Rent Allowance (HRA)

Percentage of Basic salary. If you are living on rent and getting HRA, tax exemption is the minimum of — HRA received — 50% of Basic salary in metro cities (40% of Basic salary for non-metros)

– Actual rent paid

Medical Allowance

– Bills for medicines and treatment for self and dependents — Upto Rs. 1,250 per month (Rs. 15,000 per year) can be claimed as reimbursement

– Bills have to be submitted in original

Children’s Education Allowance

– Tuition fees up to Rs. 100 per month per child up to a maximum of 2 children — Can be to a school, college, university, educational institution within India

– Includes payments towards play school and nursery

Leave Travel Allowance (LTA)

– Can be availed of twice in a block of four calendar years — Current block is from 2014–2017 — To claim, you have to officially be on leave, only domestic travel is allowed, and you have to be among the travellers

– Only travel cost is exempt, not entire holiday expense on food, accommodation etc

Profession Tax

– State government tax payable @ Rs. 200 per month (Rs. 300 in February) ie. Rs. 2,500 per year
 — Reduces your taxable income

Deductions allowed under Section 80C

Public Provident Fund (PPF)

– Upto Rs. 1.5 lakhs deduction allowed — Lock-in period of 15 years — Interest is tax free (regulated by Govt)

– Proceeds on maturity are tax free

Employee Provident Fund (EPF)

– 12% of Basic salary deducted per month — Matching contribution from employer — Only employee contribution eligible for tax deduction

– More on EPF

Life Insurance Premium, ULIP

– Premium for self, spouse, children — If purchased after 01-Apr-12, deduction allowed if premium < 10% of sum assured

– More on Life Insurance and ULIPs

Equity Linked Savings Schemes (ELSS)

– Upto Rs 1.5 lakhs deduction allowed — Lock-in period of 3 years for each investment — Proceeds on maturity (and dividends if any) are tax-free

– More on ELSS mutual funds

Tax Saving Deposit Scheme in Post Office / Bank

– Lock-in period of 5 years
 — Interest is taxable

National Pension System (NPS)

– Upto Rs 1.5 lakhs deduction allowed — From FY16, additional deduction of Rs 50,000 allowed u/s 80CCD(1B) — Contribution and accrual is exempt, proceeds on maturity are taxable

– More on NPS

Sukanya Samriddhi Yojana (SSY)

– account can be opened for a girl child (birth till 10 years of age) — upto Rs 1.5 lakhs deduction allowed — Interest rate currently 8.5% (regulated by Govt)

– Deposit, interest, withdrawal all tax-free

Deductions available under some other sections

Section 80D

– Upto Rs 25,000 towards premium for health insurance of self, spouse, dependent children — Upto Rs 30,000 towards premium for health insurance of self (senior citizens) — Upto Rs 30,000 towards premium for health insurance and medical expenses for parents

– More on Health Insurance

Section 80E

– Deduction for interest on education loan — No limit on amount of interest that can be claimed as deduction — Deduction available for 8 years (max) or till interest is paid — Interest should be paid from income that is chargeable to tax

– More on Education Loan

Section 80GG

If self employed professional, or salaried but do not receive HRA, exemption is least of — rent paid minus 10% of total income — Rs. 5000/- per month

– 25% of total income

These are some of the more common deductions available — the complete list is on the Income Tax Department’s website.

Hope you found these useful — now go and beat the taxman! 😀

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Originally published at www.getwalnut.com on February 28, 2017.

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