Why save on tax? As you climb up the ladder of earning, you will face paying taxes to the government. In turn, it helps enhance various schemes and also uplifts economic conditions.
As responsible citizens, it is our duty to pay taxes and contribute to the growth and development of our country. However, there are ways in which you avail of tax-saving schemes that help save and invest.
In this blog, we will discuss some of India’s most popular ways to save tax:
- Invest in tax-saving instruments: One of the easiest ways to save tax in India is by investing in a Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS), Unit Linked Insurance Plan (ULIP), Tax-Saving Fixed Deposit (FD). These instruments offer tax benefits under Section 80C of the Income Tax Act, of 1961. The maximum limit for tax exemption under Section 80C is ₹1.5 lakh per annum.
- Buy health insurance: Health insurance is not only important for securing your health but also helps you save tax. Under Section 80D of the Income Tax Act, 1961, you can claim a tax deduction of up to ₹25,000 on the premium paid for health insurance policies for yourself, your spouse, and your dependent children. If you are paying the premium for your parent’s health insurance, you can claim an additional deduction of up to ₹25,000.
- Claim House Rent Allowance (HRA): If you are a salaried employee and live in a rented accommodation, you can claim a tax deduction on the House Rent Allowance (HRA) received from your employer. The amount of tax deduction will depend on the HRA amount, your salary, and the city you reside in. You can use an online HRA calculator to determine the tax deduction on your HRA.
- Donate to charity: Donating to charity is not only a noble act but also helps you save tax. Under Section 80G of the Income Tax Act, of 1961, you can claim a tax deduction for donations made to charitable organizations. The tax deduction will depend on the amount donated and the type of charitable organization. You can claim a tax deduction of up to 50% or 100% of the donated amount.
- Claim tax deduction on education loan: If you have taken an education loan, you can claim a tax deduction on the interest paid on the loan under Section 80E of the Income Tax Act, 1961. The tax deduction is available for a maximum of 8 years or until the interest is fully paid, whichever is earlier.
In conclusion, there are various legal ways to save tax in India. However, it is important to plan your investments and expenses wisely to maximize your tax savings. If you are still unclear, it is recommended to consult a tax advisor or financial planner. They will help you with tax planning and ensure compliance with the Income Tax Act, of 1961.