Often, investment for most individuals begins and ends with tax planning. Although it is pertinent to avail tax breaks, this should not be the sole focus. Start by jotting down your key financial objectives, the tentative time of money requirement and the corpus needed to achieve those goals. One can use tax saving investments effectively, to achieve financial goals.

Maximising your tax saving Exemptions/reimbursements – Identify the reimbursements available from the company and take maximum advantage of the same. Normal expenses that one incurs could help save tax. Example- Telephone/fuel reimbursements, meal vouchers and company car. A person in lower tax slabs can reduce his tax liability to nil with exemptions alone. Similarly, salaried employees staying in rented apartments can claim exemption under Section 10(5) of the Act in respect of house rent allowance by making the HRA a component of there salary.

Most people's investing strategies begin and conclude with tax planning. Although tax benefits are important, they should not be the primary emphasis. Begin by writing down your most important financial goals, as well as the estimated amount of time you'll need to reach them and the amount of money you'll need. To reach financial goals, one might make good use of tax-saving investments. Getting the most out of your tax refund Reimbursements/exemptions – Determine which reimbursements are available from the firm and make the most of them. Expenses that one incurs on a regular basis may help one save money on taxes. Telephone/fuel reimbursements, lunch coupons, and a business automobile are just a few examples. Exemptions alone can decrease a person's tax payment to zero in lower tax brackets. Similarly, paid personnel living in leased flats can seek an exemption from home rent allowance under Section 10(5) of the Act by making the HRA a part of their income.

Some of the popularly known Exemptions/Reimbursements

House Rent Allowance

Minimum of –
1. Actual HRA
2. Rent Paid – 10% of Basic
3. 40% of Basic (Non-Metros) or 50% of Basic (Metros)

Transport Allowance

Rs 800 / Month (1600 Per Month from A.Y. 2016-17)

Leave Travel Allowance

Two trips in a block of 4 Yrs Amount not exceeding Air Economy or Rail AC-I Fare shall be for shortest distance and for a single destination

Deductions

Section 80C allows a maximum limit of Rs 1.50 lakh across investments ranging from provident fund, PPF, infrastructure bonds, fixed deposits (5 years or more), Sukanya Samriddhi Account, NSC, insurance/pension plans, unit linked insurance, equity linked savings scheme etc. It also includes tuition fees of your children and the repayment of principal on your housing loan. Deduction under section 80C and Tax Planning

The interest component on your home loan has a separate limit of Rs 2 lakh. Income Tax Benefits from House Property and Loan

Medical premia upto a maximum of Rs 15,000 (Rs. 20000/- wef A.Y. 2016-17) qualifies for deduction, with an additional Rs 15,000 for parents. Additional deduction of 20,000/- (Rs. 30000/- wef A.Y. 2016-17) could be availed in case of a senior citizen.You can claim a separate deduction for medical premium of your parents. Deduction U/s 80D for Mediclaim Premium to Individual, HUF, Senior Citizens

A person who have spent money on the maintenance (including medical treatment) of dependant persons with disability, could avail deductions 80DD of the Act. Section 80DD Deduction- Medical expense of disabled dependent.

Individuals paying interest on education loan should obtain the interest payment certificate under section 80E of the Act. Section 80E – Deduction for Interest on education Loan

Those who are suffering from not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 50,000/- and in case of severe disability to the extent of Rs. 100,000/- under section 80U of the Act. Deduction u/s. 80U for disabled persons

A maximum of Rs 1.50 lakh can be invested in provident fund, PPF, infrastructure bonds, fixed deposits (5 years or more), Sukanya Samriddhi Account, NSC, insurance/pension plans, unit-linked insurance, an equity-linked savings scheme, and so on under Section 80C. It also includes your children's tuition payments and the main instalment on your home loan. Section 80C Deduction and Tax Planning A separate restriction of Rs 2 lakh applies to the interest component of your house loan. Benefits from a House and a Loan in Terms of Income Tax Medical premia of up to Rs 15,000 (Rs. 20000/- as of A.Y. 2016-17) are eligible for the deduction, with parents receiving an extra Rs 15,000 each. In the case of a senior person, an additional deduction of Rs. 20,000/- (Rs. 30000/- as of A.Y. 2016-17) may be claimed. You can claim a separate deduction for your parents' medical premiums. Individuals, HUFs, and Senior Citizens can deduct their Mediclaim premiums under Section 80D. A person who spends money for the maintenance (including medical treatment) of disabled dependents may be eligible for deductions under section 80DD of the Act. Deduction under Section 80DD for medical expenses incurred by a handicapped dependant. Individuals who are paying student loan interest should acquire an interest payment certificate under section 80E of the Act. Section 80E - Interest on Education Loans Deduction Under section 80U of the Act, those who have at least 40% of any handicap are eligible for a deduction of Rs. 50,000/-, and in the event of severe impairment, a deduction of Rs. 100,000/-. Disabled individuals are eligible for a deduction under section 80U.

NPS

It reduces your tax liability by availing the deductions u/s (80CCD) which will be upto Rs.1,50,000/- under section 80 CDD(1) and an additional Rs.50,000/- under section 80CCD (1B) per assessment year (applicable from FY 2015-16/AY 2016-17)

Particulars
Without NPS
With NPS
Gross salary
2,500,000
2,500,000
Basic Salary (40% of Gross salary)
1,000,000
1,000,000
NPS contribution (10% of Gross salary) -80CCD(1)
-
100,000
Additional contribution u/s 80CCD (1B)
-
50,000
Less: Total Deductions u/s 80CCD (1)and 80CCD (1B)
-
150
Less: NPS Deduction u/s 80CCE
-
100,000
Total Taxable Income
2,500,000
2,350,000
Total Tax @ applicable tax
592,250
545,900
Additional Tax Saving due to NPS
-
-
 

Disclaimer
This is only for illustration & a ready reckoner. We do not offer tax ralated advisory. Please contact your tax consultant on tax related issues.

This is merely to serve as a visual aid and a calculator. We do not provide tax-related advice. If you have any questions about taxes, please contact your tax advisor.