Have You Furnished Your Tax-Saving Documents to Your Employer? It’s that time of the year when emails pop up from the Human Resources Department reminding us to submit our tax savings documents. This leaves most of us in frenzy and our chartered accountants, financial planners, and tax consultants begin to receive our frantic calls, requesting for the proof of investments. However, the last minute dash may not pay rich dividends.

While the employed take enormous efforts to earn a salary, it is also equally important, in our opinion, to restructure your salary in a way that saves on the tax outgoing from your hard earned income. And mind you, if you do so you’ll have a greater “Net Take Home” (NTH) pay, which will allow you to streamline the finances and help you buy the physical assets such as your dream house, car, etc.

The vital documents required under various components are as follows:

Section 80 C: The deduction under section 80C is allowed from your Gross Total Income. These are available to an Individual or a HUF. Total Deduction under section 80C , 80CCC and 80CCD(1) together cannot exceed Rs 150,000 for the financial year 2015-16 (assessment year 2016-17). For many, this limit gets exhausted by their employee provident fund (EPF) which is deducted by the company. But, if it hasn't, ensure you have invested this money in instruments allowed under Section 80C . And present the necessary policy papers or mutual fund investment document to the department. Some of the documents that are required are:
 

• Your contribution to Provident Fund


• Your children’s school fees


• Life insurance premium payment


• Stamp-duty and registration charges


• Principal repayment on your home loan







 

HRA: If you are paying rent for an accommodation and if your organization extends you HRA benefits, then this is another vital component that can help you to reduce your tax liability. But note that you cannot pay rent for the house which you own and if you are residing in it. On the other hand, if you are staying in a rented house and you are the one paying the rent, then the HRA exemption [under Section 10(13A)] can be availed of for the period that you occupy the rented house during the financial year.

However to obtain an exemption, you are required to submit appropriate and adequate proof of payment of rent for the entire period you wish to claim the exemption. But if you as an employee are getting a HRA of less than Rs 3,000 per month, you are not required to provide a rent receipt to your employer.

Also you need to note an important change in HRA rules introduced in FY 2013-14. As per the circular issued by the Central Board of Direct Taxes (CBDT) in October 2013, if you are paying an annual rent of more than Rs 1.00 Lakh or Rs 8,333 per month, then you will have to report the Permanent Account Number (PAN) of your landlord to the employer (Earlier you had to furnish a copy of the PAN card of your landlord only if your annual rent exceeded Rs 1.80 lakh, or Rs 15,000 per month). If your landlord does not have a PAN, then you need to file a declaration to this effect from your landlord along with the name and address of the landlord.

Leave Travel Concession (LTC): While you may be fond of opting for time off from work to travel with your family for a holiday, don’t forget to assess what tax benefits are extended to you for doing so. The Income Tax Act provides tax concession if you have actually incurred expenditure on your travel fare anywhere in India, either alone or along with your family members (i.e. your spouse, children, parents, brothers and sisters who are mainly or wholly dependent on you). But such exemption is limited to the extent of actual expenses incurred i.e. you can claim exemption on the LTC amount OR the actual amount incurred, whichever is lower.

It is vital that you utilise your leaves and travel concession wisely, as this will not only de-stress you, but also help in reducing your tax liability. After you have returned from your journey, in an excitement please do not tear your travel tickets / boarding pass (for air travel), as you need to submit them to your employer so that your tax liability can be reduced.

Education and Hostel allowance: If you are married with kids, and if your employer provides education allowance, then do not refrain from availing it, as this can again help you in reduction of your tax liability. The exemption you receive under the Income Tax Act is Rs 100 per month for a maximum of two children (i.e. in other words Rs 2,400 p.a. totally). Similarly, if your children are staying in a hostel, a maximum of Rs 300 per month per child, subject to a maximum of two children, will be available to you as an exemption (i.e. Rs 7,200 per annum). Make sure you submit the necessary receipts to the HR Department to help you save on your tax outgoings.

Medical Reimbursement: During the year if you and / or your family members have visited a doctor or bought medicines from a chemist, all the expenditure you and / or your family members incurred during the year for medical purpose too would help reduce your tax liability. As per the Income Tax Act, the maximum amount of deduction available with you is Rs 15,000 for every financial year, and to claim this you are required to submit, to your employer, the medical bills for the financial year stating the total amount you intend to claim.

Similarly, it is noteworthy that if your medical insurance premium is paid by the employer or reimbursed, then that too will not be taxable. Also if your employer is providing medical facility in hospital or clinic owned by him, local authority, Central Government or State Government then the medical expenditure incurred under such a hospital too, would not be subject to any tax.

Remember to produce adequate bills/documents; to avoid the incidence of tax. Similarly, petrol, diesel and other bills need to be given to ensure you are not taxed on these amounts.

So, the next time you get your pay cheque in hand, please evaluate these points, and assess whether every component in your salary is structured well – and to do so you can certainly talk to your Human Resource (HR) department, as they may help you with this.

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