Bonus is one thing that each employee cherishes but well, it can also escalate the amount of Income-tax payable by you. Bonus from your employer is fully taxable in the year in which you receive it. So next time you receive a bonus, be happy but at the same time also think about the ways to save taxes on your bonus. What’s the best way to save taxes? Well, the answer is investment. Investment does not mean any adhoc one but you should be a smart investor. Many a times it happens that a taxpayer is having certain sums of money with him but due to lack of adequate knowledge about the various good investments, he fails to grab the benefits and hence ends up blocking his funds with poor plans. To avoid this, let us have a look at the various options in which you can invest and save taxes!
- Life Insurance- Individual paying the insurance premium in respect of policy on the life of his own, spouse, children and parents gets the deduction upto Rs. 1,50,000/- U/s. 80C of the Act (considering the overall ceiling limit of Rs. 1,50,000/- U/s. 80CCE).
- ELSS– ELSS refers to Equity Linked Saving Scheme. Companies offering ELSS plans invest their funds into Equities or Debts and in return taxpayers get the return in the form of capital gains. The maximum deduction offered U/s. 80C of the Act is upto Rs. 1,50,000/- (considering the overall ceiling limit of Rs. 1,50,000/- U/s. 80CCE).
- PPF– Any taxpayer may invest any amount upto Rs. 1,50,000/- during the year in his PPF account. Income-tax department provides the deduction U/s. 80C of the Act subject to maximum upto Rs. 1,50,000/- (considering the overall ceiling limit of Rs. 1,50,000/- U/s. 80CCE). Interest from PPF gets compounded and varies year to year. Interest rate for F.Y. 2015-16 is 8.70%. Proceeds of interest earned from PPF and maturity proceeds are tax free.
- Health Insurance– Payment of health insurance other than in cash serves a deduction upto Rs. 25,000/- U/s. 80D of the Act and where policy taken on the health of senior citizen of age above 60 then deduction shall be upto Rs. 30,000/- for Financial Year 2015-16. Taxpayer should note that amount of health premium is on yearly basis hence taxpayer need to opt for health insurance for every year.
- Donations- Apart from investments in the schemes mentioned above, you can also save taxes by donating. Department of Income-tax provides a 100% deduction of the amount of contribution U/s. 80G of the Act if one makes charity for such great cause. Further if one contributes to non-government trusts offering charitable endeavors then he also gets a deduction of 50% of the amount contributed U/s. 80G.
This was about investments. Apart from this, if you anticipate that the slab rates or tax rates will be reduced in the next year, you can insist your employer to pay you the bonus in the next year, so that the taxes will be reduced. Also, submit your tax investment details to your employer before he deducts tax on bonus. Now you know how you can save tax on bonus and you have a reason to rejoice when you receive the same instead of worrying about the hike in taxes you will have to pay.
Moreover, do you know that allowances that you receive from your employer can also help you save your taxes! To know more – click here