5 Tips to save tax from your income
Most of the people find themselves in a challenging situation as the tax filing dates get close. Fortunately, there are now several ways in which salaried professionals can reduce their income tax liabilities and save more. However, while the options make it easier for taxpayers to select an investment option as per their requirements, the plethora also makes things confusing for many people.
If you are searching for income tax saving tips and ways to improve your tax planning skills, here are a few tips that can help-
1. Invest in insurance
One of the best ways to save tax is to buy health and life insurance for you and your family members. The premium paid for insurance is eligible for tax deductions under Section 80D, 80DD and 80DDB of the IT Act.
The amount of deduction varies under every section allowing you to select insurance products based on your insurance and income tax saving limit.
2. Tax saving through investments
There are also several investment options that are eligible for tax deductions under sections such as 80C, 80CC, and 80CCD. Some of the most popular choices include-
- Tax-Saving FD
- ELSS Mutual Fund
- Insurance products such as ULIPs
The best investment option for a salaried person can be selected by one's investment objective and risk appetite.
3. Home loan for saving taxes
Another popular and highly beneficial tax saving option for a salaried professional is taking loans such as home loans. When you take a home loan, you can claim deductions on the principal amount you repay to your lender under Section 80C.
Moreover, even the interest paid to the lender is eligible for deductions under Section 24. The combined deduction with a home loan can be up to Rs. 2 lakhs in a financial year in most cases. The deduction is also available when you take a loan for home construction or renovation.
4. Taking an education loan
If you take an education loan for yourself, your spouse, children, or a student for whom you are a legal guardian, you can claim tax deduction under Section 80E.
Saving taxes through an education loan is one of the most beneficial income tax saving options as there is no maximum limit on the deduction. However, the deduction can only be claimed on the interest and not the principal amount.
5. Tax deduction with HRA
HRA or House Rent Allowance is the allowance given by your employer if you live in rented accommodation. This HRA can be deducted from the gross income for calculating your taxable income.
The income tax laws have various rules for claiming this exemption. On the basis of these regulations, you can claim full or partial HRA exemption. If you do not have HRA component in your salary, talk to your employer about the same as it can help you save a considerable amount of money in taxes.
Being a smart taxpayer
There are several income tax saving schemes and options that you can consider to reduce your tax burden. However, to make the right selection, it is essential for a taxpayer to avoid the last-minute tax filing rush. When you are running out of time, it is very much possible for you to end up selecting an option which might not be the right choice for you.
So, start your tax planning as soon as a new financial year begins and try to know as much as possible about all the available options to make the right tax planning decisions.
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