How to Save Income Tax in India

Every year an amount is deducted from your earnings and moves to Government Treasuries. This is known as Income Tax whose estimation equals a certain percentage of your legitimate earning. People opt for different measures to save their hard-earned money from being abducted by the Income Tax India. In this article, a brief account will be offered about the various measures that are normally opted to save the amount payable as Income Tax.

Currently, people are choosing from among the tax-saving ways that are legally valid. Investment in the Medical Insurance, Life Insurance, NPS, Tax-saving Mutual Funds, etc., offer tax deduction under the various sections of Income Tax Act, 1961.

Saving up to Rs 1.5 Lakh under Section 80C

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Contributing to the following account will allow an Indian Individual to increase his/her tax deduction limit by INR 1.5 lakhs.

The schemes can be narrated as under:

  • Tax-saver FD: The scheme stays valid for 5 years. The investor will be allowed to make tax deduction by 1.5 lakhs under section 80C of Income Tax India.
  • PPF Interest: Public Provident Fund is a legitimate investment scheme, maintained by the Government of India. The annual interest payable in such an account is completely exempted from charging any tax.
  • ELSS Funds: These are mutual funds formations that invest almost 80% of its assets in equity. The returns are subjected to Long Term Capital Gains Tax at 10 percent; taxes are rated after considering the exemption of Rs, 100000.
  • National Savings Certificate: National Savings Certificates has a tenure of 5 years and a fixed rate of interest is achieved as a return. The net investments in this account and the interest are subjected to deduction U/s 80C of Income Tax India.
  • Life Insurance Premiums: All types of LI policies offer a deduction of taxes under section 80C of Income Tax India. The deductible limit is, however, 1.5 lakhs. The cover amount must have to be 10 times the premium paid as an annual premium.
  • Senior Citizens Savings Scheme: Investment in this scheme will be subjected to a tax deduction by 1.5 lakhs INR to the ceiling. The scheme has a maximum tenure of 5 years and is only available for the Indian Citizen above 60 years of age.

Must Read – How to Calculate Taxes on your Bitcoins?

Tax Savings for Salaried Indian Citizens:

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 It is a common experience to see many of the Indian Citizens to go for investment in frantic ways for saving taxes. However, apart from the most popular 80C, Income Tax India offers various other incentives and allowances for such people.

Some of these provisions are narrated hereunder:

  • Restructuring Salary: Proper restructuring may be helpful in reducing tax liability. The options may include:
  1. Choosing food coupons in lieu of lunch allowances. Food coupons will allow tax redemption up to Rs. 50.
  2. If allowances like the medical allowance, transport allowance, allowance for children education, etc., could be included in the Salary, the production of bills will help in limiting tax liability.
  3. High Prerequisite taxation could be averted if the employee travels in an office car instead of a personal car.
  • Enjoying allowances u/s 80C: Section 80C offers a maximum deduction of INR 1 lakh for salaried people. These people try to make full utilization of the facility by investing in any of the available investment options. The options include:
  1. Life Insurance Premium
  2. Public Provident Fund
  3. Tuition fees paid for children’s education, up to a maximum of 2 children
  4. National Savings Certificate
  5. Equity Linked Savings Scheme
  6. 5 year fixed deposits with banks and post office
  • Options beyond 80C: After making full utilization of the 100000 limits under section 80C of Income Tax India, some other options will allow him to enjoy several other deductions:
  • Under Section 80D, the person will be permitted to enjoy a deduction for Medical Insurance for self, spouse and dependent children and the maximum limit is Rs. 15000. If the person invests in Medical Insurance of parents aged above 65, the total amount of deduction will be Rs. 20000.
  • Section 80G of the Income Tax India allows a deduction for donations made for a specific cause or to charitable institutions.
  • Tax Savings from Home Loans: Salaried people can utilize their Home Loan for tax deduction purposes. The principal amount of the loan can be included under section 80C that offers a deduction of Rs. 100000.

Section 24 offers deduction over interest paid – the total amount is Rs. 150000.

Conclusion:

People, on their way to find a legitimate process to evade from tax payment, sit with their Chartered Accountant most frequently. Most of the CAs are also offering resolutions for tax issues. It enables these persons to earn handsome besides their main professions like Auditing etc. Many of these Chartered Accountants and Lawyers are utilizing their professional expertise behind helping people in tax harrows.