First job? Make sure you know all these tax saving tips

Excited about making an income and learning the ropes? Make sure you understand your salary breakup and how to save tax as well.

Nothing compares to the feeling of becoming financially independent. Growing up, you saw visions of yourself going to work and getting a good salary that would finance all your dreams. You could travel the world, go partying with your friends, buy an expensive phone, upgrade your wardrobe…the world is now your oyster, and you can do with your money as you wish.

We hate to rain on your parade at this point, but have you taken a close look at your salary slip? There are taxable heads of income in there, and these will cost you at the end of the financial year in March when you file your income tax returns. At that point, your accountant might tell you that you need to invest in X type of scheme or pay a certain amount of money in an existing investment to save tax. You might make some grave financial mistakes if you try to save tax in a hurry.

So the time to get some essential tax saving tips on board is now.

The tax saving tips you must know

As a person who has just recently joined the workforce, you are allowed a period of adjustment where you learn about taxation, various tax heads and how to save tax legally. The Government offers legal ways to save taxation on your income. Also, you will be taxed annually as per your tax bracket. Consider the following tax saving tips and information:

* TDS (Tax Deducted at Source) is applicable on your income, but you can get it back by filing your ITR annually.

* Regular ITR filing is a must, whether your income qualifies you for a tax bracket or not. It is needed for a variety of purposes, from buying a home to visiting certain countries.

* You can invest in a variety of tax saving schemes to get a tax benefit annually. But do note which sections of the Income Tax Act, 1961 you are getting the tax saving on. Multiple options offering tax benefit under a particular section will not offer a cumulative advantage. For example, premium against life insurance, principal repayment for home loan and several mutual fund schemes all offer tax benefits under Sec 80C. The tax saving is extended up to Rs 1,50,000 on all these options, not each option individually.

* Renegotiate your salary structure to get as low tax liability as possible. Your company might suggest reducing the ‘Basic’ component of the salary, since it is a taxable one. But here’s an interesting counterpoint: the lower the basic salary, the lower the take-home component of your package. If you have suitable tax saving investments, you can ask for the basic component to be increased.