5 Ways Salaried People Can Save Tax in 2023

Tax planning is essential for salaried employees to optimize their budget. Due to limited available expenses for tax deductions, it is crucial to actively participate in tax planning to maximize benefits under the Income Tax Act. Simply relying on the HR division of the company is not sufficient. Planning for the taxation impact on salary should be a part of overall financial planning for the family. This can result in higher cash flow, better savings, and improved investment decisions, leading to a more secure future.

5 Ways You Can Save Taxes In 2023

Optimize Your Salary Structure:

One of the easiest manners in which one can save taxes is by optimizing the salary structure against just agreeing to the default structure given by the company. Most companies have lower basic salaries and a major component to other incentives or other bonuses as part of their salary. This does not result in any tax savings as the same is completely taxable. The individual can instead choose to customize their salary structure based on the type of expenses incurred by them which could allow them to reduce their overall taxable component. This can include increasing the share given to HRA, including LTA, meal coupons, or child education allowance. Apart from the above, uniform allowance and gadget allowance can also result in decreasing the basic/incentive salary which is completely taxable to other allowances which are deductible based on actual payments.

Invest In NPS:

Despite being a valuable tax-saving tool, the National Pension System (NPS) remains underutilized by many investors. It offers an additional deduction above the limit under Section 80C, allowing taxpayers to invest for their retirement and save on taxes. While investing in NPS may temporarily reduce an employee's cash on hand, the funds are allocated to a portfolio of growth-oriented equity schemes, debt, and bonds, instead of solely towards taxes.

Select A Proper Tax Regime:

One of the underrated tax saving options to reduce the cash outflow is the mere selection of the correct tax regime. In the case of a salaried employee, there is an option to select the tax regime each year without any hassle. An employee may opt for the new tax regime if their salary is under INR 7,50,000 which would allow them to post standard deduction to file a return with nil tax payable.

As opposed to the above, during the years when the salary is higher due to a bonus or any such one-time income instead of salary, the employee can invest the higher amount and claim a deduction related to the same.

Since salaried taxpayers have the option to switch between the tax regimes as needed, the employee can take advantage of the same to ensure that they select the regime as is beneficial to the employee rather than stick with the same each year.

Must Read: How to Check the Status of Your Salaried Personal Loan Online?

Pay Mediclaim On Behalf Of Parents:

The payment of mediclaim for parents is eligible to be claimed as a deduction against one’s salary wherein the total limit for deduction under Section 80D gets extended to INR 50,000 if the parents are above the age of 60. The payment of Mediclaim on behalf of parents can result in tax deduction especially if the parents are in a lower tax bracket or their income is below the taxable level. The children can claim the premium paid in their ITR as a deduction thus resulting in tax savings for them. Mediclaim on behalf of their parents is one of the easiest tax saving options for salaried employees.

Utilize LTA:

A proper and optimized salary structure can lead to the claim of LTA or Leave Travel allowance for the employee if the same is utilized properly. LTA can be a tax saving option for salaried if utilized properly. LTA deduction is allowed for two journeys in a block of four years and hence the employee can claim the travel expenses for two holidays in four years as a tax-deductible holiday. This ensures the conversion of leisure expenses into tax-deductible expenses. The provisions of LTA only allow for the journey expenses and not the stay expenses. The LTA rules also allow for carrying forward one such claim if not claimed in the block of four years thus providing room for the employees to plan their travel.

The Income Tax rules in India while strict have various provisions which if applied properly can result in tax deductions and tax savings for a taxpayer in various proportions. The only thing one needs to do is to approach tax planning with equal vigour as they do with their financial planning in general. As it is rightly said, “A penny saved is a penny earned”, savings through proper tax planning can augment the income of the taxpayer and his/her family.

Short on Funds to Meet Tax Obligations? Personal Loans Can Help

If one finds that they are short of sufficient funds to meet their commitments, and do not have much time before the deadline, a personal loan may help. Depending on their eligibility, one could get quick approvals and quickly get the approved funds in their bank account, following loan approval. One reliable lender you can turn to is SMFG India Credit with its accurate online personal loan EMI calculator and eligibility calculator. Apply at low interest rates starting only from 11.99%* per annum, today.

DISCLAIMER: The above article is for your knowledge only and should not be construed as professional advice. Loans are disbursed at the sole discretion of SMFG India Credit. Final eligibility of every applicant will depend on a number of factors, including SMFG India Credit's policy at the time of loan application.