How to save tax in India?

How to save tax in India?

Tax planning is one of the ways that can help you save tax and increase your income. The Income Tax Act provides deduction for various investments, savings and expenditure made by the taxpayer in a particular financial year.

How to save income tax in India? (How to save income tax in India)

We will discuss some of the ways that can help you save income tax in India. Prominent among these are the recommended ways to save tax under Section 80C, 80CCD (1b), 80D, 80E, 80EE, 80EEA, Section 24, and 80G.

Ways to save income tax –

1. Investment option under section 80C

Make investments of Rs 1.5 lakh under section 80C to reduce your taxable income.

2. Investment option under section 80CCD (1b)

Additional deduction of Rs 50,000 can be claimed under section 80CCD(1b) by investing in NPS.

3. Investment option under section 80D

• Medical Insurance: On medical insurance annual premium of yourself and your family members, the maximum deduction allowed, under section 80D, is Rs.1,00,000. (Rs 50,000 for self and family if you are a senior citizen, and Rs 50,000 for senior citizen parents).

• Medical Expenses: If you are a senior citizen, and not covered by any medical insurance, deduction can be claimed under 80D on medical expenses up to Rs. 50,000.

• Medical Insurance (Self, Spouse & Children and Dependent Parents - Working from 60 years) : Deduction up to Rs.50,000 can be claimed on annual medical insurance premium. (Rs 25000 for self, spouse and children and Rs 25000 for dependent parents below 60 years of age).

• Medical Insurance - Senior Citizen: If annual medical insurance premium has been paid for senior citizens, then deduction up to a maximum of Rs 1,00,000 per annum can be claimed.

4. Investment option under section 80EE

• Home Loan Interest: A deduction of up to Rs 50,000 can be claimed on home loan interest. (Deduction up to Rs 2 lakh can be claimed under section 24 on home loan interest). In addition to the section 24 limit, section 80EE allows you to claim deduction up to Rs 50,000 on home loan interest.

5. Investment options under section 80EEA

• The eligibility for additional interest of Rs 1.5 lakh on purchase of a new house under the Affordable Housing Scheme under Section 80EEA, has been extended up to March 31, 2022.

• Home loan will also help you reduce your taxable income, as deduction up to Rs 1.5 lakh can be claimed on the principal portion of the home loan under section 80C, and the interest portion as deduction from income from house property. as can be claimed.

• If your income does not include HRA component, you can claim house rent deduction under 80GG. Salaried employees, whose HRA is part of the salary and pays house rent, can claim exemption on HRA to reduce their taxable salary in full or in part.

6. Any donation to charity can be claimed as an inside deduction under section 80G.

7. Deduction under section 80E is allowed on interest repaid on education loan.

How to save tax? (How to save tax)

The tax-saving options available to an individual and HUF (Hindu Undivided Families) in India are under Section 80C of the Income Tax Act. Section 80C covers various investments and expenses on which you can claim deduction up to the limit of Rs 1.5 lakh in a financial year. We have seen above some points related to expenditure. Now let us talk about the investments given below, on which deduction is allowed under section 80C.

• Bank Fixed Deposit of 5 years (Section 80TTA- Deduction up to Rs.10,000 allowed for interest received in Savings Bank Account).

• Public Provident Fund (PPF)

• National Savings Certificate (NSC)

National Pension System Atal Pension Yojana

• Unit Linked Insurance Plan (ULIP)

Sukanya Samriddhi Yojana (SSY)

• Senior Citizen Saving Scheme (SCSS)

• On capital gains under section 54-54F, capital gains exemption deduction can be claimed.

Now let's talk about how to save tax by tax planning?

1. Check the tax saving expenses you already have like insurance premium, tuition fees for

children, EPF contribution, home loan repayment etc.

2. Subtract this amount from Rs 1.5 lakh to know how much to invest. You do not need to invest the full amount if expenses are covering the limit.

Choose tax saving investments based on your goals and risk profile. ELSS funds, PPF, NPS, life insurance, health insurance and fixed deposits are some of the popular options.

Source: Groww.in