It may be difficult to go through the Indian tax system, but, it is possible to slice down significantly on income tax by using certain strategies Save Income Tax. Even though there are several deductions offered by the Income Tax Department, they cannot just be exploited without some sound planning and knowledge of relevant legal provisions. Discover how to reduce your tax burdens by incorporating savings techniques in your financial planning.
Maximising Deductions and Exemptions
- Investment in Tax-Saving Instruments: Section 80C of the Income Tax Act allows a maximum deduction of Rs 1.5 lakh per annum. Additionally, Public Provident Fund (PPF), National Savings Certificate (NSC) as well as other instruments like Equity Linked Saving Schemes (ELSS) should be invested into. By doing so, taxable income can be reduced considerably.
- Take Advantage of Home Loan Benefits: Utilisation of section 24 along with those provided under section 80C for repayment of loans allows individuals who own homes to claim interest paid on home loans at an amount up to Rs.2 lakhs thereby resulting in huge savings.
- Utilise Health Insurance Benefits: Under section 80D taxpayers were allowed deductions up to Rs25,000 for people below sixty years old and fifty thousand rupees for senior citizens above sixty years old if they had health insurance premiums thus giving much respite from taxation
Unique Ways to Save Income Tax
- Choose a New Tax Regime Carefully: The new regime is characterised by low tax rates but lacks most itemised deductions whereas determinations as to liabilities under both the old and new ones can be made depending on particular cases.
- Income from House Property: Renting out property also allows for write-offs of these expenses against rent received because of payment of municipal taxes & standard deductions @ 30% on rental income etc, which help in reducing tax liability thereby making this approach attractive for homeowners.
- Education Loan Interest: Section 80E enables you to deduct interest, spent without limits, on education loans thus relieving those who pursue higher education.
- Advanced Tax Planning: Commence with the planning exercise at the onset of a financial year. This will enable you to spread your investment burden. It also guards against missing out on deductions due to last-minute investments.
For detailed strategies and more ways to save income tax, refer to Jaagruk Bharat’s comprehensive guide on income tax savings.
Leveraging Lesser-Known Deductions
- Save through Donations to Charity: A good deed can be done by making donations to charity institutions and funds besides saving taxes under section 80G with deductions ranging from 50% to 100% depending on the institution.
- Increase Savings Account Interest Exemption: Interest earned from a savings account is exempted from tax for the first Rs.10,000 as per Section 80TTA. For senior citizens, it’s Rs50,000 which includes interest income from fixed deposits under section 80TTB.
Protecting Your Retirement Money
- Invest in the National Pension System (NPS): NPS contributions qualify for a deduction of up to Rs.50,000 above the existing limit of Rs1.5 lakh covered in Section 80C as stated under Section 80CCD(1B).
- Long-Term Gains Planning: Instead of short-term investments that do not bring profits for many years, incorporating long-term financial planning helps an investor manage taxes more efficiently thus making some stockholders less taxable than others.
Conclusion
Minimising your tax outgo requires an efficient tax plan to be in place. This can significantly reduce the amount of tax payable while at the same time improving one’s financial status through proper understanding and application of different exemptions and deductions.
For more insightful content on managing taxes effectively and saving on taxes, visit Jaagruk Bharat to stay informed so that you can make educated decisions about your taxes.