Tax Planning to Have More Take-Home Salary

Tax Planning to have More Take-Home Salary

How the income tax is becoming a difficult decision?

The income tax is increasing and the salary earners are worried to plan more savings. The Basic Exemption Limit (BEL) is an amount up to which an individual will not be liable to pay any income tax. However, the income exceeds BEL will be liable to be taxed at a specific rate applicable under income tax act. After BEL, there is only one section which is very popular to get deduction i.e. Section 80C. During FY 2017-18, the limit under section 80C is 1.5 lakh. In case the BEL or limit under 80C raised from these limits then the take-home pay of each individual will be increased. The income tax department may introduce other clauses to increase the happiness of individuals by reducing the tax liability. However, the reduction in tax liability will also increase the liquidity in Indian economy leading to higher chances of inflation. In order to contain such liquidity, the income tax department may introduce new investment avenues with providing tax deductions.

Tax Planning Instruments:

At present, the investments in Life Insurance, Provident Funds (Employees Provident Fund, Government Provident Fund, Public Provident Fund etc.), Equity Linked Saving Schemes and Mutual Funds, 5-Yrs Tax Saving Deposits either in Banks or Post-Office including Senior Citizens’ Savings Scheme, Sukanya Samriddhi Account (SSA), payments of tuition fees, and even the repayment of principal amount of home loan covered under the minimal amount of Rs. 1.5 lakh.

How to plan for saving more:

It is required to extend the limit of 1.5 lakhs and also required to raise the Basic Exemption Limit (BEL) to at least Rs. 2 lakhs. However, the investment in e-NPS attracts more 50 thousand to be covered in 80CCD (1B).

Due to implementation of demonetization, Goods and Services Tax, and Real Estate Regulation and Development Act (RERA), the real-estate sector has been badly affected; the government may decide to give tax-benefits to home-buyers to improve the situation of badly-affected real estate sector.

Build home and invest through SIPs:

During 2017-18, the first time home buyers are allowed to get an additional benefit of Rs. 50 thousand under section 80EE of income tax act. The interest on Home Loan can be claimed as deduction under section 24 for up to Rs. 2 Lakhs and apart from it tax deduction of Rs. 50 thousand can be claimed under section 80EE however, this additional deduction can be claimed only if the loan has been sanctioned during FY 2016-17 for the amount up to 35 lakhs and the value of residential house property is not more than Rs. 50 lakhs. For 80EE, the individual should not have his own house earlier on the date of sanction of loan.

Further, the sentiments of investors have also been improved during last few times, and there are chances of more growth in industries. One can opt systematic investment plans (SIPs) to get more returns out of mutual funds along with the tax benefits under section 80C.  

*Copyright © 2018 Dr. Lalit Kumar. All rights reserved. 

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