How To Save Income Tax?
In India, Every eligible person is required to pay a certain percentage of tax on their income every year. This certain amount of tax is called income tax. Every person desires to earn as much as possible while paying the minimum amount of tax. It is mandatory for every person falling under the taxable slab to pay the applicable amount of tax. Failing to pay the required amount of tax attracts the penalty and prosecution provision so there is no way of save tax through Tax Evasion. However, there is a way of tax saving legally through the proper tax planning. According to the Income Tax Act, 1961, there are certain deductions that the taxpayer can avail and save on his income tax. Through the course of this blog, we will be taking a look at the various tax deductions that are available for saving the tax.
- Deductions under Section 80C, Section 80CCC, Section CCD – Under these sections the government of India promotes the money of the taxpayer to be invested in the legitimate resources. Some of the schemes that are included under these sections include PPF, National savings certificate, Pension Plans, Life insurance policy, 5 year tax saving fixed deposit, equity oriented mutual funds and Contributions to employee provident funds. The total amount allowed as deduction collectively under all the three sections is Rs 1,50,000 i.e. you can get an reduction of 150,000 by investing in any one of the prior mentioned schemes or the combination of them. One important thing to be noted here is that recently an additional limit of 50,000 has been introduced for the investment in national pension scheme under section 80 CCD.
- Deduction of 80D, 80 DD and 80 DDB – These sections are applicable for the life insurance and medical treatment. Section 80 D is applicable for medical insurance policy for self or the relatives, 80 DD for the medical treatment of handicapped dependent and section 80 DDB for the treatment of special diseases. If you are making expenditure on any of these things you can claim deductions.
- Deduction for housing loan – Under the 80 EE an claim for deduction can be made for the loan taken and the interest to be paid for the house. The mandate amount that you can claim for the housing loan is Rs 50,000 that can further extend to Rs 2,00,000 if you satisfy certain conditions.
- House Rent Allowance – A salaried employee can claim the house rent paid as a deduction for the payment of the income tax. To claim this deduction the taxpayer is required to file the copy of rent agreement along of the ITR filed. The amount of exemption allowed can be calculated on any of the criteria mentioned below-
- House Rent Allowance Received from the Employer
- Actual rent paid less 10% of basic monthly salary
- 40% of basic salary for those staying in any place except the metros cities of Delhi, Mumbai, Kolkata and Chennai. In case of people staying in these four cities, exemption can be upto 50% of basic salary
- Tax deductions for donations – In order to promote donations by the public at large provisions are made to provide deduction on the amount of donations made. There are four section applicable to it Section 80 G for general donations, Section 80 GGA for the contribution made to rural development programs or the scientific research, Section GGB and Section GGC for the contributions made to political parties.
These are some of the smart ways by which you can avail the deductions and save upon your taxes. All of these ways are legitimate which you can apply and conduct proper tax planning in consultation with your tax professional.