Best Way to Save Income Tax in India
In India, the tax season can be a stressful time for many individuals. However, with proper planning and knowledge, you can effectively reduce your tax burden while staying compliant with the law. Understanding the various provisions and exemptions available can significantly impact your tax liability. Here are the top seven income tax saving tips in India:
1.Utilize Section 80C Deductions:
It is one among the best ways to save income tax in India. Section 80C of the Income Tax Act offers numerous avenues for tax savings. Invest in instruments such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), and Employee Provident Fund (EPF) to claim deductions of up to ₹1.5 lakhs annually.
2.Opt for Health Insurance (Section 80D):
Purchase health insurance for yourself, your family, and dependent parents to avail deductions under Section 80D. Premiums paid towards health insurance policies qualify for deductions of up to ₹25,000 for self and family, and an additional ₹25,000 for parents (₹50,000 if parents are senior citizens).
3.Invest in NPS (National Pension Scheme):
Contributions made towards the National Pension Scheme are eligible for tax deductions under Section 80CCD(1B), over and above the limit of Section 80C. You can claim an additional deduction of up to ₹50,000 by investing in NPS Tier-I account.
4.Interest on Home Loan (Section 24):
If you have taken a home loan, you can claim deductions on the interest paid under Section 24. For a self-occupied property, the maximum deduction allowed is ₹2 lakhs per annum. Additionally, you can claim deductions on principal repayment under Section 80C.
5.Utilize HRA (House Rent Allowance):
If you are a salaried individual receiving HRA as a part of your salary, you can claim exemptions on rent paid. The exemption is determined as the least of actual HRA received, 50% of salary (for metro cities) or 40% of salary (for non-metro cities), and actual rent paid minus 10% of salary.
6.Claim LTA (Leave Travel Allowance):
Make use of Leave Travel Allowance provided by your employer to claim tax exemptions on expenses incurred for domestic travel. You can claim LTA twice in a block of four years for travel within India, subject to certain conditions.
7.Tax-Saving Fixed Deposits and Bonds:
Invest in tax-saving fixed deposits offered by banks or bonds such as the National Saving Certificate (NSC) to avail deductions under Section 80C. Tax-saving fixed deposits typically have a lock-in period of five years and offer tax benefits on the invested amount.
In conclusion, tax planning should be an integral part of your financial planning process. By leveraging the various provisions and exemptions provided under the Income Tax Act, you can effectively reduce your tax liability while ensuring financial security for yourself and your family. However, it is advisable to consult with a tax advisor or financial expert to make informed decisions based on your specific financial situation and goals.
