Passed by the Parliament of India, a citizen of the country who earns an income is supposed to pay a certain amount of tax. This is popularly known as Income Tax. Nonetheless, not everyone pays the same amount of tax. Divided by categories, people belonging to different social, financial strata pay a different amount of tax, senior citizens pay a separate amount of tax and those regardless of the age, earning less than INR 2, 50,000 have to pay no tax at all!
Categorized or uncategorized, almost all taxpayers are stressed and perturbed when it comes to paying the tax. It is a burden which may be shared amongst the members of a family or even in a small business. To curb this issue committing tax fraud will not be a sought after option.
Thus ways to Legally Reduce Income Tax is given below:
Smart Payment of Fees –
Being aware of timing, planning ahead will decrease the amount of tax paid. With the non- Individual Retirement Account being tax deductible, a wise decision would be paying all fees through that account, although an Individual Retirement account is present.
Structuring the Salary –
Expenses such as uniform, conveyance, medical insurance, phone bills, newspaper and office entertainment are supplementary with the current job. Rather than discontinuing the job, chatting with the employer about quitting these expenses will save the taxes.
Travel Allowances –
An employer is responsible for granting its employee a travel allowance but only on the production of actual bills. It can be claimed for an economy class of Air Travel or AC-I of Train travel. For the shortest route of travel within India can be paid for.
Deduction on Medical Insurance –
Above the 1.5 lakh limit, the tax can be saved for a family through Health insurance premium. Even visiting the doctor for health checkups up to rs 5,000 can economise taxes. For senior citizens, this service can be extended up to Rs 30,000.
Under the section 80C, in order to gain tax rebate, there are multiple investment schemes. Deposition in Employee Provident Fund, Investing in Equity Linked Saving Scheme, with the highest return amongst all saving schemes- investment into Sukanya Samriddhi Account is the best option for a girl child. Even opening a Tax Saving Fixed Deposit account, enrolling into National Saving Certificate scheme or Senior Citizen Saving Scheme can save tax to some extent.
Retirement Plan –
To reap maximum benefits from retirement savings, one needs to plan his retirement out. Making contributions to Roth Individual Retirement Account will benefit at retirement when one has to pay no tax on withdrawal of this money. Or even contributing to Employees Provident Fund through one’s entire work life, will reap profits during retirement!
After putting in all that effort, nobody will like to give in the hard-earned money to the government, and Taxes are unavoidable. Without the help of a professional, just with a tad bit of wise planning, time and patience one can successfully reduce the amount of tax to be paid! So, let that money keep doing its work!