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Last-minute tips to optimise your tax savings
Often it is seen that individuals fail to optimise their taxes, most of the time due to lack of adequate awareness.
Tax planning should categorically not remain a last minute rush; one needs to put in ample time to understand the nuances on how to optimise on the same.
Here's a quick round up on what you should do whilst you apply finishing touches to your tax planning:
Exemptions: 'Tax saving without investing'
There is relatively low awareness amongst individuals about the same and hence, many lose out on opportunities to save taxes -- a ready reckoner on exemptions:
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Last-minute tips to optimise your tax savings
Some quickies:
- House rent to the extent of Rs 3000 / month does not require any rental receipts as proofs
- Conveyance allowance can be availed without any proof
- Medical allowance has to be adequately supported by means of medical receipts
- LTA can be claimed by availing leaves from company (mandatory), as proof one may have to submit tickets, bills or boarding pass as may be applicable
Perquisites: 'Extra benefits'
- Some companies structure their employees' salary stack in a tax-friendly manner, helping them avail -- telephone / petrol re-imbursements, company car lease/vehicle maintenance, medical re-imbursements, food coupons, club subscriptions, uniform allowance etc., all these are categorically tax-free and hence can be availed to maximum extent to reduce your taxes.
- EMI paid towards company car lease would be tax-free perquisites
- All re-imbursements would require valid proofs -- bills, receipts as may be applicable
- Perquisites are subject to FBT (fringe benefit tax), payable by the employer. This may be passed to the employee -- one would have to pay roughly about 6.8% taxes as against normal tax rates
- Some perquisites are taxable -- hence, one needs to evaluate options and then choose tax-efficient ones
Last-minute tips to optimise your tax savings
Tax saving investments: 'Align them with financial goals'
Beyond your exemptions and tax-free perquisites, you can avail deduction u/s 80C which allows investments to the maximum extent of Rs 1 lakh. There are a host of options available herein across debt and equity instruments (see table below):
Key points to remember
- Use a judicious mix of debt-equity while investing depending on your risk appetite
- Align your investments along with your financial goals: Retirement, Children education / marriage etc
- Avenues that offer tax-free returns should be used
- If you have availed ELSS last year, don't forget to invest this year when the markets are down. This is an opportunity to average out your cost, when the markets scale up you would break even earlier
- Don't stop your equity related investments which are ongoing, this is the right time to invest in equities
- Have an appropriate life cover, health cover for yourself and family
- Hope this article comes in handy for all those individuals who have waited with bated breath for the eleventh hour. Next time though plan in advance
Anil Rego is the founder and CEO of Right Horizons , an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.