Tax Saving Plan for Employed People

Employed people have less scope for tax savings as compared to self-employed people.

If you are currently employed, the income and benefits from and related to your employment are taxed and you cannot claim any deductions against employment income except that are specifically allowed by the system.

Here are some taxes planning techniques which can lead to save taxes:

• Arrange to get nontaxable benefits: There are some employment benefits which are not taxable like contributions to a registered pension plan, contributions to a group sickness or accident insurance plan, contributions to a private health services plan, all or portion of the cost of free or subsidized school services for your children.

• Ask to have your source withholdings reduced wherever possible: In any situation where you expect to receive a refund after filing your return, you should review the form which you file with your employer and seek to have source with holdings reduced. If you get a refund, that means the has been holding your money and not paying you interest on it for many months. It is better you can send a cheque to at filing time so that you can use that funds in the meantime.

• Pay interest owing on loan from employer by January 30 of the following year:

If you receive a low interest -free loan from your employer, you are considered to have received a benefit from employment. The benefit is set at the CRA's current prescribed rate of interest minus any interest you actually pay during the year or within 30 days after the end of the year. This will provide you with a cash flow advantage.

• Consider employee's profit sharing plans for cash flow purposes: there is no source withholding on the amounts paid by the plan to you. Careful timing of the employers' contributions and the Tax Saving Plans disbursements can give you better cash flow than would a straight bonus payment.

• Transfer retiring allowances to an RRSP: If you transfer the entire retiring allowance into an RRSP, the legal fees will never become deductible. When you take payments out of the RRSP, they are no longer considered a retiring allowance.

• Claim the employment tax credit to help cover your work related expenses: Employees can claim a 15% tax credit to help cover their work related expenses.

• Employed trades people can claim the deduction for the cost of new tools: If you are an employed trade person and you must use your own tools on the job, you can deduct the portion of the cost of new tools.

• You can claim rebate for GST/HST paid on expenses deductible from your employment income.

Source: http://blogs.rediff.com/taxsavingplans/2016/07/14/ritikashah11998-19/

Tax Saving Plans - A Must for Everyone

What does one mean by income tax savings? What are the different tax saving plans etc. These are some of the terms which one needs to be aware of. To make sure that your hard earned money stays with you, it is important for you carry out an extensive research when it comes to tax savings. The income that you earn annually is subject to the Income Tax laws governing that country. The tax rates are not fixed and are based on the income that you earn throughout the year. But, one can save a lot on tax money, only if he or she plans it the proper way and takes wise steps at different stages of life.

So if the question how to save tax is mind boggling you, well we'll help you out with the best solutions. To extract maximum tax benefits, you need to invest your earnings in various tax savings schemes. These tax saving investments come with loads of features and benefits. With the help of tax deduction, a break granted by the government, some part of your income is excluded when it comes to calculating government tax.

Apart from this, you can also invest in long term Best Tax Saving Plan investments like pension savings plan for a life after retirement or a life cover to secure your family's future. Which means that tax saving plans do not just reduce your taxable income but also help you and your family have a secured future.

Now let's come to saving tax through life insurance policies. Life insurance policies are one of the best ways to save tax as under the Income Tax Act 1961 (Act), when investing in a life insurance plan, the premiums that you pay when calculating taxable income are waived off. So the assured sum and the profit which you receive are all exempted from tax. What's more? By investing in a Life Insurance Scheme, you get double the tax benefits. Now isn't that what you call a win-win situation.

Moreover, apart from this investing in a health insurance scheme can also generate great tax benefits. Along with money saved from tax, you secure yourself from any uncertainties in life like illness, accident etc. So to make sure that your money stays in your hand and you can give your family a good life, go ahead and invest in the best schemes as far as your taxes are concerned. It is a time tested that only the best investment plans guarantee a safe and sound return.

The author has a deep knowledge on the tax instruments and has been associated tax saving investments for over a decade now. And has a deep knowledge on the options to choose from.

Source: http://blogs.rediff.com/taxsavingplans/2016/07/06/ritikashah11998-18/

6 Tips That Can Help You Save A Lot More Tax

Planning your money right can help you save a lot that you otherwise end up paying as tax. If you take the right measures, you can reduce your taxable income, hence saving a lot more than usual. If you recently joined the tax-paying brigade or aren’t sure about where to look for tax savings, don’t worry! We have answers to all your questions related to Tax Saving Plan.

Here are six tips that can help you save a lot of tax:

1.       Save tax on rent payment

If you’re living in rented accommodation, your employer is supposed to give you some part of this money as House Rent Allowance (HRA). If you stay with your parents, you can avail tax benefits under section 80GG by paying the monthly rent to them. You can claim the least of the following:

·         25 per cent of the total income or

·         2,000 per month or

·         Excess of rent paid over 10 per cent of the total income

The HRA tax deduction limit has been increased from Rs. 24,000 to Rs. 60,000 in this Union Budget. However, this deduction isn’t available if you have a residential property in your name or in your spouse’s or child’s name.

2.       Pay less tax if you’ve an ailing dependant at home

Under section 80 DDB, you can get some tax benefits if you have an ill dependant at home. You get to avail a deduction of up to Rs. 80,000 for the medical treatment of a super senior citizen who’s at least 80 years old. If the person is between 60 and 80 years, it will be Rs. 60,000 and if the person is below 40 years, the exemption is Rs. 40,000. This deduction, however, is available for some specific illnesses and you can claim them only if the ailing person hasn’t filed for any such deduction separately.

3.       Invest in ELSS funds

Investing in ELSS funds is the most prudent way to reduce your taxable income. Because of their great potential and high liquidity, they are one of the most preferred investment options. If you’ve already fulfilled your KYC requirements, you’re eligible to invest online. Otherwise, you need to go through the KYC screening process first.

4.       Invest in ULIPs

ULIPs are something you can opt for as you get to avail the benefits of an insurance policy as well as an investment. Some of the ULIPs even cost less than direct Mutual Funds, and unlike ELSS funds, you can switch your corpus from equity to debt and vice versa. Since all insurance plans enjoy a tax exemption under Section 10 (10d), there’s no tax implication on the gains made from switching. Don’t forget to check the cost of the ULIP before investing.

5.       Restructure your salary

If you bear some expenses just because you’re working in a particular company, you can always ask your employer to restructure your pay. You can claim to avail various perks and allowances. All you need to do is give a proof of these expenses to avail a tax-free allowance. Some such allowances that fall under this category are:

·         Conveyance

·         Medical treatment

·         Telephone and mobile

·         Books and magazines

·         Uniform

Since these allowances are given according to your grade, you can’t ask for all of them. Your employer has the right to decide your eligibility for these.

6.       Leave travel allowance and medical expenses

Most employers give part of your salary as medical expenses. If you start collecting medical bills and produce them when needed, this allowance can become tax-free for you. The upper limit, however, for these expenses is Rs. 15,000 in a financial year. If you have any dependents, you can produce their medical bills as well. Similarly, depending on the HR policies of your company, you can also avail leave travel allowance that can be claimed if you go on a vacation. You need to produce the actual bills and receipts here as well.

[ Source : https://blog.bankbazaar.com/6-tips-that-can-help-you-save-a-lot-more-tax/ ]

Tax Saving Plans

Many in India Still Think That Insurance is an Avoidable Expenditure

The insurance sector has only 2% penetration in Indian market largely to the fact that Indians see it as an avoidable expenditure. Many in India don’t see the urgency to get insurance policies. A majority of Indians still reside in rural areas or lesser developed towns where awareness is restricted. Large percentage of illiteracy still prevails in major parts of India. In order to penetrate deeper in the Indian market the insurers need to spread awareness among the ‘centers of influence’ i.e. the ‘village sarpanch’ in case of villages. Centers of influence can be different for different people. People mostly get influenced by people on whom they have trust. For some they can be their family and friends as well. Many people in India still don’t bother to buy essential insurance policies like health insurance. Reasons can be many but one of the most common reasons is that people don’t find the urgency to buy an Life insurance policy. India is still a developing country and there is large inequality of income spread. A large number of people somehow manage to pay bills and any money left after paying bills is mostly spent on leisure or savings in banks (mostly). Having an insurance policy like term insurance or health insurance is still thought of as a luxury. It is seen in case of motor insurance that people in order to avoid challahs or fine get only third party insurance as it is mandatory. They don’t take comprehensive motor insurance policies that cover their own vehicle as well. The whole ideology is to save or avoid paying premium even if they are exposed to a higher financial risk. Many people mostly in second and third tier cities where traffic checking is less strict than a city like Delhi don’t even bother to get third party or liability insurance done for their vehicles. The defaulters are obliged to be penalized heavily. Still, in order to avoid paying premium they don’t get it done. And there are many others who still don’t trust that their claim would be paid by the insurance company when the need arises. Maybe they have seen or witnessed cases where claims have been rejected by companies. There can be faulty or fraudulent claims by the policyholder.

Although the scenario has been changing post liberalization with the advent of many private players in the Indian Insurance market space there are still paths left to be unblocked. Some of the world’s largest and most reputed insurance companies partnered with Indian corporate houses have ventured in India. They have brought international expertise and know how in the country. With aggressive advertising and transparent disclosures the insurance industry is expanding. It is still in a very nascent stage. There have been major alterations and modifications in handling the various intermediaries in the insurance sector to make insurance selling fairer and more convenient. The easier accessibility of the internet and rage to buy everything online among the masses has seen the birth and exponential rise of online insurance policies being offered by various insurers.

A lot of awareness and trust is still to be spread among the Indian masses to encourage them to be adequately insured. Insurance is an extremely importance risk management tool. Not being insured or being underinsured is a major risk. Being adequately insured gives a person a sense of self sufficiency and confidence to face adversities. This message has to be scribbled in the Indian psyche. Insurance is not a mere tax saving scheme rather it is the most trusted confidant that would come to aide in the most desperate times. With more education and fair trade practices one can hope to see a fair insurance market penetration in the country in times to come.

Source: http://tax-saving-plans.tumblr.com/post/144543645260/many-in-india-still-think-that-insurance-is-an

Tax-Saving Options that Save Tax and Grow Your Wealth

If you are reading this, you are likely to be someone whose income exceeds the threshold of Rs 2.5 lakhs for paying taxes. There are some legitimate ways of saving taxes and the good thing is that most of them also help you grow your wealth. These options usually have a lock in period and vary in the nature and amount of return they provide. You must also remember that each of these alternatives also serve specific purposes and tax saving is not the purpose but an ancillary benefit of that.

What is pre-determined and what is optional. EPF, Home Loan repayment and Tuition Fees are pre-determined. Add them up and see how much of your 1.5 lakh limit is utilized.

ELSS Tax Saving Mutual Funds

ELSS or Equity Linked Saving Schemes are a kind of equity-linked mutual funds.  As they invest in equity or stocks, ELSS funds have the ability to deliver superior returns - 14-16% over the long term. That’s a full 6-8% above inflation. This return is not guaranteed though but historical evidence suggests that these returns are achievable over the long term.

Public Provident Fund

PPF is a good option if you are looking for an option with certain returns.

Your PPF investments earn interest at a rate announced every year – currently 8.7%. PPF return is therefore mostly at par with inflation. However, it is tax-free and you can do a lump sum or small regular investments.

The duration of a PPF account is 15 years which is extendable by 5 years at a time. You cannot withdraw money from your PPF account except under certain conditions but not before 5 years.

You can invest in PPF through a bank or Post Office. Ability to invest online is limited.

Life Insurance Premium

This was almost the default Tax Saving Plans option for years, however, over the last few years; most informed investors have learnt the perils of choosing this option

There are 2 kinds of Life Insurance Policies:

Pure risk also called term life which ensures a risk to the life of the insured

Risk+ investment: which pay you back money over time

While pure risk life insurance is something everyone with a dependent must have, it’s not an investment. Life insurance is an expense- something you pay to ensure that your dependents are not left stranded should something unfortunate happens to you.

National Pension Scheme

National Pension Scheme is a lot like investing in mutual funds with its Safe, moderate and Risky options. The returns are not guaranteed.

You cannot withdraw until 60 and the corpus amount must necessarily be invested in an Annuity. The withdrawals are also taxable.

Pension Funds

Pension funds are designed to provide you with an income stream post retirement. They come in two flavors: Deferred Annuity and Immediate Annuity.

For deferred annuity plan, you invest annually until your retirement. Once you reach your retirement, you have can withdraw up to 60% of your accumulated corpus and have to re-invest the remaining in an annuity fund which will give you a monthly pension.

When it comes to immediate annuity plans, you invest a bulk amount one-time and get monthly pension from the next month itself. You would typically use these to invest your retirement corpus.

Source: http://tax-saving-plans.tumblr.com/post/144496559495/tax-saving-options-that-save-tax-and-grow-your

Before Buying Insurance Policy to Save Income Tax

Premiums paid towards these insurance plans buy you protection. What’s more – you can also get tax benefits on the maturity amount/returns from insurance plans. For employees Jan-Feb is season of submitting income tax proof.  Many people buy insurance policy, in a hurry, to save tax and submit the proof to employer. Buying an insurance policy is a long time commitment, similar to marriage. So It is advisable to understand all aspects of claiming tax benefit in buying insurance policy.  Let us examine these aspects in detail as per current income tax laws.

What is tax benefit available for insurance policy?

Any amount paid to an insurer to buy or to keep a life insurance policy in force can be claimed as a deduction from gross total income by the policy holder. So premium paid for a life insurance policy can be deducted from gross total income before arriving at taxable income subject to certain conditions.

Life insurance plans are eligible for Best Tax Saving Plan deduction under Sec. 80C. Deduction benefit up to Rs 1.5 lakh under Section 80C.  Section 80C relates to deduction allowed under investments in instruments like PPF, insurance and pension policies.

Pension plans are eligible for a tax deduction under Sec. 80CCC. Deduction benefit up to Rs 1.5 lakh under Section 80CCC.

Health insurance plans/riders are eligible for tax deduction under Sec. 80D. You can get a tax deduction of maximum Rs 25,000 on the health insurance premium for self and family. If you are a senior citizen, you can claim tax deduction on the premium of up to Rs 30,000.

Combined Limit of deduction under Sec 80C & 80CCC & 80 CCD is Rs 1, 50,000.

The proceeds or withdrawals of our life insurance policies are exempt under Sec 10(10D), subject to norms prescribed in that section.

Who can get the tax benefit on premium paid for a life insurance policy?

On whose name should the life insurance policy be to claim the tax benefit?

An individual can only claim tax benefit under Section 80C of the Income tax Act, 1961, on life insurance policy(s) bought in the name of self, spouse or children. You can buy a life insurance policy for any number of your children irrespective of whether they are minor, major, married, unmarried or adopted. A policy taken in the name of any other person won’t be eligible for any tax benefits. So life insurance premium paid by you for your parents (father / mother / both) Brother, Sisters or your in-laws is not eligible for deduction under section 80C.

Source: http://tax-saving-plans.tumblr.com/post/144290926275/before-buying-insurance-policy-to-save-income-tax