New-Age Tax Saving Instruments for 2019

It’s that time of the year again when everyone is looking forward to the next budget announcement. And, this being the year of elections, there’s been a lot more conversation on budget reformations. The last few years have seen some transformative changes by the central government, benefitting both individual tax-payers and organisations, and there are high hopes from this budget as well.

Irrespective of the changes brought about by a new budget, there are options galore for the tax-paying population to reduce their tax liability by taking advantage of various exemptions and allowances. Employers can also help their workforce reduce the tax liability by weaving these exemptions with #NewageEmployeeBenefits.

Home: Buying a home is much more attractive once you consider the tax benefits. Besides the Section 80C benefits, Section 24B offers deductions of up to 2 lakhs for interest on home loan if the home is self-occupied. For homes given on rental, additional interest losses can be carried forward.

Education: Considering learning and development is high on the agenda of most millennials, it’s a good idea to encourage employees to send their spouses and children for higher education, preferably with a study loan. Especially since Section 80E offers tax exemptions on the interest paid for the loan.

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Health: With a rising number of lifestyle diseases and increasing cost of treatment, it’s a good idea for employees to purchase personal health insurance policies for themselves and their dependents. Sections 80D, 80DD and 80DDB offer exemptions for health insurance premium, medical expenses for disabled dependents as well as that for specified critical illnesses. The amount varies based on the age of the insured and the extent of disability.

Social Responsibility: The current generation is much more aware about their dependence on the society around them and their obligation to it and is keener than ever to play a role in changing the inequalities around them. While a lot of them play an active role by volunteering their time, a large percentage would like to contribute financially. Thankfully, donations to specified charitable institutions and political parties are tax-exempt up to a certain limit.

Meal/Cards: Meal cards and Gift cards currently enable tax savings up to Rs. 13,000/- every year. Moreover, FICCI has recommended the meal benefits to be increased to at least 4 times the current value to factor in the rising inflation and keep this benefit meaningful and relevant for the employees. If this recommendation is implemented, meal cards will be highly appreciated by the generation that loves to eat out- The Millennials. The additional benefits of incorporating these cards as employee benefits, is the portability and wide acceptance network like in case of Sodexo, where employees enjoy complete freedom of choice they so desire!

National Pension Scheme: For those who view PF as a staid and old-fashioned investment tool, NPS is an extremely lucrative option. With an option to invest up to 75% of the fund in equity, it’s attractive to a generation that has a higher risk appetite. Moreover, 60% of the withdrawal amount at maturity is tax-exempted, making it an even more profitable investment.

A salaried individual opting for NPS can also claim a tax deduction under 3 different section:

a) Contribution of max 1.5 lakhs per year is tax-deductible under Section 80C

b) Contribution to NPS is tax-exempted under Section 80CCD (2), up to a max of 10% of basic salary

c) An additional tax deduction up to Rs 50,000 can be availed under Section 80CCD(1B)

If organisations can choose the best possible exemptions and investments and offer the same to their employees as part of the benefits, it would be a win-win situation for both parties resulting in better employee experience and better organizational culture.