This document provides tips to avoid paying more tax this year. It recommends not claiming medical reimbursement if eligible expenses are below the Rs. 15,000 exemption limit. It also advises carrying forward capital losses to offset future capital gains and properly claiming eligible exemptions for house rent allowance, medical insurance premiums, and leave travel allowance. The document further suggests transferring provident funds to new employers instead of withdrawing within 5 years to avoid taxation.
Things you should avoid for not paying tax this year
1. Things You Should Avoid For
Not Paying More Tax This
Year!
Things You Should Avoid For
Not Paying More Tax This Year!
2. Things You Should Avoid For
Not Paying More Tax This
Year!
Taxpayers are always interested to know how they can reduce the
tax outlay or rather manage tax outflow. Income Tax Law has
allowed some of the deductions and exemptions which result in
reduction in tax payable. However, there are some things which
you should avoid for not paying more tax this year. Let’s see
which are those?
3. Things You Should Avoid For
Not Paying More Tax This
Year!
Medical Reimbursement
Medical reimbursement is provided by some employers for the
medical expenses incurred by the employees. Employee is
required to submit the bills to his employer, prior to when he
receives his Form 16.
4. • Medical expenditure would include doctor’s consultation fees, medicines
bills etc. This allowance is exempt to the extent of Rs.15000.
• Medical expenses incurred for spouse and children of the employee:
children may be dependent or independent, married or unmarried
• Medical bills generated for the treatment of parents, brothers and sisters
who are wholly or mainly dependent on the employee.
To be noted: It is other than the allowance, as the medical allowance is fully
taxable.
5. Losses under the Head “Capital Gains”
• If the capital loss is from the same head during the same year, it shall be
carried forward and can be set off against the gains arising in the next
year..
• If you wish to avoid more tax this year, all you need to do is calculate
income and loss (long term and short term) and consider that in your
return of income.
• Your main focus would be adjustment of losses in current year and if
there is no sufficient income in current year (under the head and sub-
head), then it is allowed to be carried forward for next 4 assessment years,
where it can be adjusted against income from the same head.
• If he intends to carry forward the losses to the next year, the taxpayer
must ensure that the taxpayer is filing the return on or before the due date
of filing as well as the loss is properly disclosed in IT return.
6. House Rent Allowance (HRA) Exemption
Most of the employees have inbuilt component for HRA which is actually
towards rent incurred by the employee.
The least amount of the three is to be considered for exemption:
• Actual HRA received by the employee.
• 50% of (Basic salary + DA) for metro cities / 40% (Basic salary + DA) in
other cities
• Actual Rent Paid – 10% of salary
Note: The rent is to be declared to the employer for claiming exemption .
Interestingly, HRA can be claimed at the time of return filing also.
7. Deduction under section 80D
Deduction under section 80D can be claimed for amount invested in
mediclaim. This deduction is also not considered by the employer in Form
16. So, if you wish to avoid paying more tax, then you should claim the
amount paid towards mediclaim under section 80D in your return of
income.
8. Leave Travel Allowance (LTA) exemption
If you have LTA component in your salary structure, then there is one more
way to save more tax. LTA can be claimed as exempt subject to the conditions
laid out by the Income Tax Law. LTA exemption can be claimed twice in a
block of 4 years (block to be observed currently is year 2014- 2018).
• If you wish to avoid paying more tax this year, then all you should do is to
collect the travel bills of the holiday trips.
• Keep in mind that LTA can be claimed only for the travel expenditure
incurred for travelling anywhere in India.
• It does not include hotel bills, meals expenditure, sight-seeing expenditure
etc.
9. Deductions available for First home buyers
Under Section 80EE, tax benefits are available for first time home buyers. The
deduction allowed on home loan interest.
There are conditions to be satisfied for the claim:
• This must be the first house you buy.
• Value needs to be less than or equal to Rs. 50 lakh.
• Loan has been sanctioned by a financial institution or a housing finance
company and between 01.04.2016 to 31.03.2017.
To be noted: “The deduction allowed is over and above 2 lakh limit under
section 24.”
“Earlier it was maximum Rs. 1 lakh and was available for only 2 Financial
years.”
10. Delay or Postponing in construction of house
If you are planning on constructing a house for which you have
afforded loan, then you should be very cautious about the completion
of construction within time limit. This is because there is limit on
claiming the preconstruction interest, which can restrict the amount of
interest which you could have claimed if the house was constructed
well in time.
11. No withdrawal of PF (provident fund) within 5 years
Even, if you change jobs in between the year, best thing would be
transfer of EPF to the new employer, which is even expected to be
online. This is because, if the taxpayer withdraws the PF within 5
years (5 years means 5 continuous years of service), such amount
withdrawn would be rendered taxable. So, if you wish to avoid
paying more tax , then switch the EPF account to the new employer
rather than withdrawing and utilizing it.
