Effective tax planning involves utilizing legal methods to minimize your tax liability. In this blog, we will explore various tips and strategies to save tax legally in India.
1. Utilize Section 80C Deductions
Section 80C offers a maximum deduction of INR 1.5 lakh for investments and expenses, including:
- Public Provident Fund (PPF)
- Employees’ Provident Fund (EPF)
- National Savings Certificate (NSC)
- Equity Linked Savings Scheme (ELSS)
- Life insurance premiums
- Home loan principal repayment
2. Claim Health Insurance Premiums (Section 80D)
Deduction for health insurance premiums paid for self, family, and parents is available under Section 80D:
- Up to INR 25,000 for self, spouse, and dependent children
- Additional INR 25,000 for parents (INR 50,000 if parents are senior citizens)
3. Save on Home Loan Interest (Section 24)
You can claim a deduction of up to INR 2 lakh on interest paid on home loans for a self-occupied property under Section 24. For rented properties, the entire interest amount can be claimed as a deduction.
4. Invest in National Pension System (NPS) (Section 80CCD)
Under Section 80CCD(1B), you can claim an additional deduction of INR 50,000 for contributions to the NPS, over and above the INR 1.5 lakh limit under Section 80C.
5. Claim House Rent Allowance (HRA)
If you live in rented accommodation and receive HRA as part of your salary, you can claim an exemption under Section 10(13A). The exemption amount is the least of the following:
- Actual HRA received
- 50% of salary (for metro cities) or 40% of salary (for non-metro cities)
- Rent paid minus 10% of salary
6. Utilize Standard Deduction
Salaried individuals can claim a standard deduction of INR 50,000 from their salary income. This deduction is available irrespective of any other expenses or allowances.
7. Save on Education Loan Interest (Section 80E)
Deduction for interest paid on education loans for higher studies is available under Section 80E. This deduction is available for a maximum of 8 years or until the interest is fully repaid, whichever is earlier.
8. Make Use of Tax Saving Fixed Deposits
Investments in tax-saving fixed deposits with a tenure of 5 years qualify for deductions under Section 80C, up to the limit of INR 1.5 lakh.
9. Claim Deductions for Donations (Section 80G)
Donations made to specified charitable institutions and relief funds qualify for deductions under Section 80G. The deduction can be 50% or 100% of the donation amount, depending on the institution.
10. Invest in Sukanya Samriddhi Yojana
Investments in Sukanya Samriddhi Yojana for the girl child qualify for deductions under Section 80C, up to the limit of INR 1.5 lakh. The interest earned and maturity amount are also tax-free.
How We Can Help
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Conclusion
Effective tax planning involves utilizing legal methods to minimize your tax liability. By understanding and claiming all eligible deductions and exemptions, you can maximize your tax savings and improve your financial health.
For professional assistance and expert guidance, visit Our Tax Partner. We are here to help you navigate the complexities of income tax filing and ensure a smooth and hassle-free experience.
