The year 2017 has begun, and with the end of the financial year around the corner, everyone is on the lookout for tax saving avenues that can double as investment options. Here’s a look at what are the ideal things to consider before investing.
Salary Planning and Tax-saving Investment Categories
It often happens that there is a large difference between your CTC and the take home salary. While it depends a lot on the salary structure offered by your company, there are avenues provided by the government that can be used to save income tax that you pay, thus increasing the amount you take home.
A good place to start, would be to speak to your HR and restructure your salary to take full benefit of all allowances (like LTA, medical, telephone etc) permitted. These small savings on individual items can add up to quite a large sum.
If you are living on rent, ensure you claim HRA benefits which makes the minimum rent paid tax free. Interest earned on savings account upto Rs 10,000 is tax free under Section 80TTA. Claim this exemption while filing for your returns. Go beyond the popular section 80C (which allows benefits upto Rs 1.5 lakh), and utilize other avenues like 80D for medical insurance premiums & 80G for donations made to charity. Invest in NPS (National Pension System) which allows a benefit of upto Rs 50,000 under section 80CCD which is over and above that offered in 80D.
Things to be mindful of, this investment season
Investments are made with the long-term financial goals in mind. Doing these just for the sake of saving tax may impact your financial planning.
Do not limit insurance cover you buy just to meet the tax requirement. Also, insurances are just that, insurances. Read the underlying conditions before investing. All tax saving instruments typically have a lock in period and penalty on early withdrawal.
Lastly, take a couple of hours on Sunday to plan adequately for your needs to stay stress free.
The author, Tejasvi Mohanram, is Founder and CEO, RupeePower.