Follow these Easy Steps to Save your Income Tax Legally
Income tax is a portion of your income that you pay to the government. The annual tax is collected by authorities to generate funds for administrative tasks. All tax-paying citizens of a country undeniably want to save on their income tax. While there are some popular, conventional methods known to be effective at saving tax, there are tons of other such easy steps to help you save income tax in India.
The government of India also encourages individuals to save tax by investing their money in tax-saving instruments listed under section 80C of the Income Tax Act. The provision helps in ensuring some form of investment without worrying about spending too much on taxes. Tax saving methods other than the requirements under section 80C have been listed below.
Ensuring money in a savings account
One of the most straightforward deductions you can make in your income tax is ensuring the provision under Section 80TTA. The overall interest earned via a saving account is exempt from taxation up to Rs 10,000 per year. In the case of senior citizens, the limit is up to Rs. 50,000 on both savings and FD accounts. His is probably the most straightforward deduction under the Income Tax Act that individuals can claim.
Saving via Life Insurance Policy
The money received after the maturity of life insurance is exempt from taxes provided the premium does not exceed 20% of the sum incurred. Apart from the tips on life insurance policies such as ULIPs, term insurance, and endowment policies are tax-deductible up to Rs 1.5 lakh.
Saving on Home Loans
Availing your home loan following section 80C can render in tax-saving benefits. Repayment of the principal amount on a home loan is tax-deductible up to Rs 1.5 lakh per annum. In contrast, the limit on the interest amount is Rs. 2 lakhs under section 24.
Savings on the sale of shares, equity mutual funds, and PF
If the amount of long-term capital gain is more than Rs. 1 lakh, then a 10% tax is applicable. Additionally, the interest received on the provident fund is not taxable, provided you complete five years before you withdraw the amount from your Provident Fund.
Investing in agriculture
As per section 10(1), any kind of income from agricultural land is exempt from taxation. It can be anything from rent and revenue on land to income generated from farm products’ sales; no income tax would be borne.
Health Insurance Premium
While certain portions of the health insurance premium are not tax-deductible, Section 80D still provides much scope for tax saving. A deduction up to Rs 25,000 is available for health insurance premiums. For senior citizens, this limit is increased to Rs 50,000. Further, dividends paid to buy health insurance for senior citizens also help you save tax by combing it with yours to deduct up to Rs. 75,000.
Donating to charity
deductions on charitable donations have different limits and rules. In most cases, the grants to NGOs, the limit is 50% of the donated amount and up to 10% of your adjusted total income. However, these NGOs need to have an 80G certificate for you to claim this deduction.
Deductions on rent
Tax deductions on rent are possible if you get House Rent Allowance (HRA). While there is no upper limit on this, there are some set of rules that cap the maximum HRA deduction. In case you do not get HRA and still pay rent, you can claim up to Rs 60,000 per annum under Section 80GG.
Deductions on home loans
Under section 24 of the Income-tax, the interest payable on home loans is deductible up to 2 lakhs per annum. The total loss claimed on the broader head of income from house property is capped at Rs 2 lakh.
Loans and scholarships for education
Under section 80E of the Income Tax Act, the interest amount paid against an education loan is not taxable. Similarly, there is no tax borne on scholarships for education.
Deductions on HUF and Extra Income
In case you earn a secondary income, then you can save money paid as tax for the income apart from salary. A typical example of the same can be money earned under freelancing. Under section 80C, once you open a separate HUF account for a secondary income, you can avail of tax benefits from investing cash from that amount.