How to save Income Tax in India? And Tax Saving Investments

People are constantly on the lookout for ways to save money on their taxes. No one wants to miss out on tax-saving options. This article will describe tax saving schemes, how to save Income Tax in India, Tax-Saving Investments, and other aspects of Investment Tax Savings.

Introduction

One of the techniques for minimizing your taxes and improving your income is to use tax planning. Tax planning is one of the methods for lowering your taxes and increasing your income. The income tax legislation allows a taxpayer to deduct certain savings, investments, and expenditures made during a given fiscal year. The Income Tax Act allows you to save money in a variety of ways.

You can get tax benefits if you pay for specified expenses in a given year, such as medical insurance or your child’s tuition fees, or if you invest in specific avenues, such as the Public Provident Fund (PPF). Before moving on to how to save income tax it is essential to have basic knowledge about what is Income Tax Act.

What is the Income Tax Act?

The process of gathering and assessing information presented by assesses in their income tax returns is known as an income tax assessment. All individuals and companies are required to file an income tax return by self-calculating the amount of income received and paying the tax due at the end of each fiscal year.

How to save Income Tax in India?

To get the most out of your tax planning, begin at the beginning of the fiscal year. Many taxpayers put off dealing with this important issue until the end of the year. When tax preparation is put off, it is possible to make a mistake and buy the wrong investment goods.

Tax preparation should, in theory, be an organic benefit of investing rather than the other way around. Financial goals should be identified and investments made to accomplish them. And, as a result of this procedure, one can receive tax benefits each year.

The first step is to see if any payments for insurance premiums or children’s tuition fees have already been made. Subtract that amount from Rs. 1.5 lakh to determine how much one needs to invest to qualify for Section 80C benefits.

Choose the optimal tax-saving instrument depending on your objectives and risk tolerance. Investors can put their money into ELSS (Equity Linked Saving Schemes) funds in the hopes of achieving decent long-term returns. In addition, all of the benefits listed in the other sections are available.

Related Read: How to Save tax in Private Limited Company

Different Tax Saving Options

• Tax Saving under Section 80D, 80EE, and 80C

1. Make an INR 1.5 lakh investment under Sec 80C to lower your taxable income. Investing in NPS under 80CCD allows you to claim an additional deduction of INR 50,000.

2. Section 80D allows a maximum deduction of INR 1,00,000 (INR 50,000 for self and family (if senior citizen), and INR 50,000 for senior citizen parents) for medical insurance purchases.

3. Section 80EE allows you to deduct up to INR 50,000 in home loan interest.

• Invest your money in Government Scheme

Several government-mandated schemes provide substantial total returns as well as tax benefits. Section 80C of the Income Tax Act allows individuals to claim up to INR 1.5 lakh in tax exemptions on total annual income spent on such investments.

Tax benefits can be obtained by investing in the following tools

1. Public Provident Fund (PPF)

2. The Senior Citizen Savings Scheme (SCSS)

3. Sukanya Samriddhi Yojana (SSY)

4. NPS (National Pension Scheme)

Donation for Saving Tax

Cash donations to designated organizations are eligible for a tax exemption of up to INR 2,000 under Section 80G of the Internal Revenue Code. Bank transfer and wire, on the other hand, are tax-free in their entirety or in part value.

You can take advantage of Section 80GGA deductions if you donate to an organization that supports scientific research or rural development.

Cash gifts are eligible for partial tax exemptions, whereas transfers made by check or draught are exempt entirely.

• Exemption under Rent Allowances

Section 10 of the Internal Revenue Code provides for tax exclusions under the house rent allowances. To be compensated for the house rent allowances component, your pay breakdown must include one.

1. House rent allowances are received on an annual basis.

2. If the individual lives in a city, they will receive 50 percent of their annual wages (40 percent in the case of non-metro cities).

3. The total annual rent is equal to 10% of the base pay.

4. You can claim tax savings on yearly rental expenses under Section 80GG if your monthly income does not contain the house rent allowances component.

Total Income Tax Deductions are determined using the minimum value of the following conditions:

1. Payment of up to INR 5,000 per month in rent.

2. A quarter of the total gross income

3. Rent is calculated as total rent minus 10% of basic pay.

Keeping the above-mentioned considerations in mind, you can discover how to avoid tax in India on salary using house rent allowance.

• Other Tax Saving Schemes  

1. The premium for medical insurance will be claimed at INR 50,000. (INR 25000 for self, spouse, and children; INR 25000 for dependent parents under the age of 60). If you are a senior citizen, you can claim a maximum of INR 1,00,000 in medical insurance premiums every year. If senior individuals are not protected by health insurance, medical expenses up to INR 50,000 can be recovered under section 80D.

2. Up to INR 2 lakhs in interest on a home loan can be claimed as a deduction under section 24. Section 80EE also permits you to deduct up to INR 50,000 in interest on a house loan that exceeds the maximum set by section 24. The eligibility for additional interest of INR 1.5 lakh on the acquisition of a new home under the Section 80EEA affordable housing initiative has been extended until March 31, 2022.

3. A home loan can also assist you to reduce your taxable income by allowing you to claim the principal amount of the loan under Section 80C up to INR 1.5 lakh and the interest portion as a deduction from income from housing property.

4. Section 80E allows you to deduct the interest you paid on your student loan. Also, under section 80G, a sum provided in the form of charity can be claimed as a deduction.

Conclusion

All of these factors will help you lower your overall taxable income for a given fiscal year, as well as educate you on the numerous government-mandated rules. To receive additional funds, ensure you submit the income tax return form and the Form 16 issued by your employer.