You could be a professional with years of experience or even a fresh at work — a substantial chunk of your salary is deducted every month in the form of taxes. With rising costs and responsibilities, it only makes sense to make use of means to save tax in India in a legal manner. Relax and sit back, as you will know learn all about legal tax saving through the course of this article.
Best 5 Ways to Save Tax in India
1. Make Use of Section 80 C & 80 D (Income Tax Act)
Section 80 C of the Income Tax Act allows you to claim tax deduction of up to a maximum of Rs 1.5 lakhs. Some of the options that are available to you include Employees Provident Fund, Public Provident Fund, Equity Linked Savings Scheme, Senior Citizen Savings Scheme, Home Loan Principal Repayment, Life Insurance Premium, National Savings Certificate, Post-office Tax Saving Deposit, Kid’s Tuition Fees and Sukanya Samriddhi Scheme.
Under Section 80 D, you can save Rs 25000 in health insurance premiums. For older pensioners the amount is Rs 30000.
2. House Rent Paid Helps In Saving Tax In India
House Rent Allowance is a common part of the salary structure for most employees. It is not completely taxable. Some part of the HRA is exempt from tax under Section 10(13A) of the Income Tax Act. Nevertheless, do remember that HRA received is fully taxable if you are living in your own house.
HRA exemption equals the minimum of these 3 items :
- Amounts to actual HRA received.
- 50% of the Basic total salary in metros and 40% in non-metro cities.
- The excess amount of rent that paid every year over 10% of the Basic annual salary component.
If HRA is not part of your salary, the maximum amount of deduction is Rs 5000 every month or Rs 60000 annually.
3. National Pension Scheme Makes You Save Tax In India
Additionally, you can make use of the National Pension Scheme to claim an additional amount of Rs 50000 under Section 80CCD (1b). Other tax saving expenses as well as investments such as PPF, kid’s tuition fee and life insurance premium can be claimed under Section 80 C and the requisite National Pension Scheme contribution will be claimed under Section 80CCD (1b) — this way you can achieve a total tax deduction of Rs 2 lakh.
It is very useful for investors who have finished their 1.5 lakh investment limit as per Section 80C. This is a great option for people who do not mind investing their money until the time they retire.
4. Home Loan Is A Way To Save Your Tax In India
Under Section 80E, if you have availed home loan for the first time then you will be eligible for a tax deduction of Rs 50,000 on the interest paid on the home loan. This is provided that you are the you are one of the co-owners of the house.
In addition, property buyer should have no other properties under his/ her name. Tax benefits under this can only be claimed post the building of your new home and not during its construction period.
5. Education Loan Helps To Save Tax In India
Under Section 80E again, expenses incurred on higher education allow you to claim tax deductions. Interest paid on education loans can aid in reducing your taxes.
The deduction amount is equal to the interest paid on the education loan. There is no upper limit for the same. You cannot avail tax benefits on the Principal Amount.
In addition, the tax deduction should not exceed your taxable income. The maximum period for you to claim deduction is a maximum of 8 years. This begins in the year you begin repaying interest on the educational loan or until the period the interest is paid in full — whichever is on the lesser side.
You will be on the road to greater tax savings if you follow the above-mentioned legal ways to save tax. All taxpayers should make use of all available tax reducing legal provisions.