Last Updated on March 17, 2023 by Flavia Calina
Income tax is a mandatory contribution that citizens have to make toward the development and progress of their country. While it is essential to pay taxes, it is equally important to save money by taking advantage of tax-saving measures. Here are some tips on how to save income tax.
Invest in Tax-Saving Instruments
The government provides several tax-saving investment options like Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS), and more. Investing in these schemes can help you save money on taxes. These investments are eligible for a tax deduction of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act.
Make Donations to Charitable Organizations
Donating money to a charitable organization can also help you save on taxes. You can claim a tax deduction of up to 50% of the amount donated under Section 80G of the Income Tax Act. This can be a great way to give back to society while also reducing your tax liability.
Purchase Health Insurance
Investing in health insurance is not only good for your health, but it can also help you save money on taxes. The premium paid for health insurance is eligible for tax deduction under Section 80D of the Income Tax Act. The deduction limit depends on the age of the policyholder and the type of health insurance purchased.
Claim House Rent Allowance (HRA)
If you are a salaried individual who lives in a rented house, you can claim HRA to reduce your tax liability. HRA is a part of your salary that is paid to you to cover your rent expenses. The amount of HRA that is exempt from tax depends on the actual rent paid, HRA received, and your salary.
Invest in a Pension Plan
Investing in a pension plan can also help you save money on taxes. The premium paid towards a pension plan is eligible for tax deduction under Section 80CCC of the Income Tax Act. The deduction limit for this section is included in the overall limit of Rs. 1.5 lakhs under Section 80C.
Take Advantage of Income Tax Slabs
One of the most important things to keep in mind while planning your taxes is the income tax slabs. The tax rates are different for different income groups. By planning your income and investments accordingly, you can ensure that you fall into a lower tax slab and pay lesser taxes.
Claim Tax Benefits for Home Loans
If you have taken a home loan to purchase a property, you can claim tax benefits on the interest and principal repaid. The interest paid on a home loan is eligible for tax deduction under Section 24 of the Income Tax Act, and the principal repaid is eligible for tax deduction under Section 80C.
In Conclusion, saving income tax requires careful planning and execution. By investing in tax-saving instruments, making donations to charitable organizations, purchasing health insurance, claiming HRA, investing in a pension plan, taking advantage of income tax slabs, and claiming tax benefits for home loans, you can reduce your tax liability and save money. Remember to consult with a tax advisor or financial planner to ensure that you are making the right investment decisions and taking advantage of all available tax-saving measures.
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