Closure of every financial year does bring anxiety of Income Tax Return to every earning individual in India. Despite lots of tax planning if you still end up paying a handsome amount of income tax every year then you may have some loopholes in your tax refund planning. You need a comprehensive and sustainable planning of income tax refund.
Here are the 7 best ways to maximize your income tax refund.
7 Best Ways to Maximize Your Income Tax Refund
1. Never Delay in Tax Filing – This means that you should never wait till the deadline of filing income tax every financial year. The sooner you file your income tax return, sooner you use the benefit of a tax refund. If you fix your own tax filing time every year you can plan your tax preparation accordingly. Besides, maintaining a discipline in ITR filing is very important. Not only you need to fix a certain time for tax filing but you also need to maintain documents and papers relevant to income tax properly throughout the financial year.
2. Consider Maximizing Your Investment under Section 80C – If you avail the entire benefit of ₹1lakh and 50 thousand capping under the provision of section 80C, it will save as much as ₹45 thousand in a financial year for the individual falling in the 30 percent tax slab (without cess). Check out the various investment instruments under 80C section of tax deduction:
- You can save the entire capping limit of Sec. 80C by investing in PPF account and receive a complete tax exemption on the invested sum and even the interest received from the invested amount. Lower your taxable income up to ₹1lakh and 50 thousand by PPF. Similar benefits can be availed by investing in EPF or Employees’ Provident Fund. Besides, you may consider investing in KVP, NPS, NSC and other government-aided investment and savings plan. You can increase your savings as well as avail maximum income tax refund at the same time through these tax saving instruments.
- Or else you may consider in investing in equity-linked savings schemes which also permits you to avail the entire tax deduction limit of Section 80C with high-income return assurance within short lock-in period. You may invest a lump sum in any one investment plan or can distribute your money in all these schemes to get better returns and high-income tax refund.
- You can avail great share of tax deduction benefit if you are liable to repay home loan installments.
- You can have further income tax refund benefits over education loan no matter if taken for you, your spouse or children under the provision of Section 80E.
3. Maximize Your Income Tax Refund by Availing Tax Deduction Over 80C Capping – Enjoy further tax deduction benefit of ₹25 thousand by securing your family’s health with medical insurance plans or mediclaims under the tax deduction provision available in Section 80D. You can claim ₹30 thousand tax deduction under this section if you are liable to pay the medical insurance premiums for your parents too. If your parents are senior people (age above 60yrs) then this tax deduction is even higher.
4. Maximize Your income tax refund by Submitting Vacation Receipts – you can also increase your tax refund benefit by claiming your Leave Travel Allowance (LTA) depending upon the structure of your salary. If you have this allowance facility then you can avail it to reimburse your travel expenses within India, once in four years.
5. Claim Tax Refund on House Rent Payments – Home rent payments may offer you complete tax exempt facility. If you are liable to pay rent towards your rental house you can totally claim for HRA deduction from your employer. If not then you can directly claim HRA reimbursement while tax filing every financial year. Thus, do not forget to keep proper receipts and documents related to your House rent.
6. Ask for Travel and Medical Allowance – Remember these travel and medical allowances can be availed only up to income tax filing of the year 2017 because from 2018 these two allowances have been replaced by a standard deduction of ₹40 thousand. For 2017 tax filing you need to maintain all the medical receipts and travel bills to reimburse the expenses. However, from this financial year you no more need to produce proves for availing the standard deduction of ₹40 thousand.
7. Request for Coupons for Meals – There is this possibility of availing tax relief a little more by asking your employer to allow a part of your pay as coupons for food. This is another option you may not familiar with. You can avail an exemption of ₹55/day over your food coupons. You may produce these food coupons for tax deduction. You may ask for 2 meals for 22 days every month. That sums up more than ₹26 thousand every year.