We have reached almost the last quarter of FY 2015-2016 and it is time to declare and conclude the investments for this year. Tax planning is a crucial thing to do, and for this the financial goals must be set and achieved wisely. To invest and to use those investments for saving taxes can be a decision that requires knowledge and correct information on Income Tax. In this post, we shall discuss several ways of how employees can maximize their tax savings in FY 2015-2016.
Know the limit of investments
Some of us lack knowledge on how much exactly should we invest so that the taxable amount is either eliminated or minimized. This information is the foremost step that helps in getting highest tax benefits. The maximum limit of investments that is eligible for tax benefits under Section 80C is 1.5 lacs (effective from FY 2014-2015). You should be aware that any investment over and above this limit will not be included in tax reduction. Therefore, it is advisable to use that money in other places that can be counted for tax benefits.
Options for investing money
There are numerous options to invest in and it requires a deep study on each to understand their subjective benefits. Fixed Deposits (for tenure of 5 or more years), LIC, ULIP, Mutual Funds, PPF etc. are some of the options that fall under Section 80C (limiting to 1.5lacs). Sections 80D, 80E etc. offer more benefits if you bear medical premium of parents (senior or non-senior citizens), or dependents with disability (if any). Moreover, you can get aids if you pay for home loans, have done charity or social welfare, pay for your child’s school fee and more. For more details about the options, read resources on income tax or consult a Chartered Accountant.
Exemptions and reimbursements from company
Most of the companies offer their employees some common exemptions like House Rent Allowance (HRA), Leave Travel Allowance (LTA for two trips in 4 years), Travel Allowance (₹ 800 at present and ₹ 1600 effective from AY 2016-2017) etc. They also reimburse medical bills of self and dependents up to ₹ 15000 per year. Such benefit and welfare plans are declared in the company policies and must be comprehended so as to maximize tax savings.
Pay Income Tax, submit proofs and file ITR
Follow the stepwise procedure of paying income tax and maintain complete transparency. Submit proofs of all the investments and by the end of FY year collect Form 16 having details of Salary Paid and TDS. This is the most important document for filing Income Tax Returns (ITR). In case you have paid any extra tax, filing ITR ensures that the surplus amount is refunded in the linked account.
For companies using HR and Payroll software, declaring investments and submitting proofs for employees becomes simplified. Through Employee Self Service software like PayWheel, employees can be free from the stress associated with Income Tax.
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