Tax season can be a stressful time, but what if there were ways to ease the burden? With proper planning and an understanding of the tax laws, you can optimize your tax liability and save money.
In this blog post, we'll explore various legal strategies and investment avenues tailored to the Indian financial landscape that can help you reduce your income tax. From choosing the right tax-saving instruments to claiming eligible deductions, we'll guide you through the steps that can lead to significant savings.
Tax Saving Investment Options Under Section 80C
As per Section 80C, the premiums paid for life insurance plans are deductible. You can claim deductions for those paid premium amounts from your taxable income and save on taxes.
Your kids’ tuition fee costs, National Pension System (NPS), ELSS Funds, Sukanya Samriddhi, National Savings Certificates (NSC), and Public Provident Fund (PPF) are a few additional tax-saving choices that fall under this division.
However, the highest amount that can be deducted from taxable income under this clause is "INR 1.5 lakhs."
Tax Benefits u/s 80D for Health Insurance
A deduction of up to INR 25,000 from your taxable income is allowed for premiums paid in any manner other than cash for health insurance covering the self, the spouse, and dependent children. Thus, here’s another solution to query on how to save tax.
You can deduct an additional INR 50,000 from your taxable income if you pay the premium for your elderly parents' (senior citizen) health insurance, enabling you to pay less tax overall. This cap covers up to INR 5000 in costs for annual preventive health exams.
Submission of Rent Receipts
You may be eligible for a deduction under Section 10(13A) if you reside in rented housing and your employer gives you House Rent Allowance (HRA). Prior to determining the tax rate on total income, one of the following three will be permitted as an exemption from taxable income:
The actual rent amount paid is over 10% of your Basic salary plus dearness allowance
Actual HRA obtained from your employer
40% of your salary if you reside in a non-metropolitan city and 50% if you reside in a metropolitan city.
But if you don't receive HRA from your company or don't own a home, you can deduct house rent costs from your taxable income if you qualify under Section 80GG. The lowest of the three of the following will be permitted as a deduction from taxable income:
INR 5000 per month (INR 60,000 annually)
Rent paid deducted by 10% of the total income
25% of the annual total income
By Buying A House Under Section 24
Under Section 24, anyone paying a maximum of INR 2 lakh as interest on a home loan can deduct that amount from taxable house property income.
Moreover, under Section 80EE, a deduction of an additional INR 50000 can be made by first-time homebuyers from their taxable income for house loan interest if the following requirements are met:
The fiscal year 2016–17 should see the approval of the mortgage
Your home loan amount mustn’t exceed INR 35 lakhs.
The value of the residential property must be lower than 50 lakhs.
No other residential properties the home buyer owns are listed in his name as of the sanction date.
Tax Deduction on Education Loan
A loan received for higher education is deductible from taxable income for the interest paid under Section 80E. Until the interest is paid or for a maximum of 8 years, whichever comes first, the deduction is permitted.
Who Can Claim: An individual may claim a tax deduction under Section 80E for a higher education loan taken for themselves. However, they can also make this claim if the loan is taken for their kid, spouse, or any student over whom they have legal custody.
Deductible Amount: The most that can be deducted from taxes as a deduction under Section 80E is unlimited. Nevertheless, the deduction is only applicable for the period until the loan’s interest is paid or a maximum of eight years, whichever comes first.
Donations For Deductions Under Section 80G
Section 80G allows tax deductions for contributions to specific relief funds and charity organizations. Nevertheless, if you make donations as goods like medication, food, etc., they won’t fall under the tax deduction provision.
Types of Donations Eligible For Tax Deductions: As per Section 80G, only gifts made with a check, demand draft, or cash qualifies for tax deductions (no deductions are permitted for donations above INR 2,000 made with any other method except cash). Tax deductions are not allowed for contributions in kind.
Eligibility: Under the Income Tax Act of 1961 section 80G, taxpayers—individuals, businesses, or HUFs—can make charitable contributions and receive tax* deductions.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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