Neeraj is in just 8 months into his first job. It is January and the buzz in office is about how to save on tax liabilities. Being a newbie in the corporate world, Neeraj feels like a fish out of water. If this is you, this article is a must-read. We’ll be enlisting some ways in which you can save tax in your initial years.
First of all, you have to understand that the income that you earn is taxable according to the Income Tax Act 1961.The provisions of this Act keep changing every year depending on the visions in the Union Budget that the Central government releases every year. The said Act lays down guidelines for deciding on taxable income and rates for levying tax. According to the budget for 2016-17, here are some tax saving tips for all those who are new to the world of taxes and deductions.
- Plan for buying a house worth less than 50 lacs. First time home buyers can avail of a deduction of Rs.50000/- for properties costing less than 50 lacs and where the loan availed does not exceed 35 lacs.
- Buy a life insurance policy. Life insurance premiums are eligible for deduction under section 80C. When you are younger, the premiums are lower for the same sum assured as compared to when you are older. It also inculcates the habit of saving in you.
- Buy medical insurance or better still buy a critical illness plan. With a critical illness plan, you are not only insured against the medical emergency, but also against the loss of income that may be the consequence of a critical illness. They are eligible for tax rebates under section 80D.
- Postpone any idea of buying that fancy car for the time being. A car is a dream for most young people; something that they want to indulge in when they are young. Luxury cars and diesel cars of all types are set to become costlier in the new financial year. So, postpone buying a car for some future date.
- Quit smoking. If you are a smoker, your expenses are going to rise because cigarettes are poised to become expensive due to increased taxation. Quitting smoking will not only improve your health, but also help in keeping your insurance premiums low.
These are the simplest tax saving tips for newcomers. Follow these & ensure that you save a decent amount of tax in the F.Y 2016-17.