Are you worried about taxes? Then this article is for you! There are a few common tax-saving ways known to everyone. But there are a few non-popular ones too. In this article, those points are discussed in detail. The conventional methods are:
- Tax-saving Fixed Deposit.
- Provident funds.
- Deduction against home loan interest.
In this article, we’ll discuss both the common and the less popular ways. Use them while ITR Filing and save taxes.
What are the ways of Saving Tax?
- Re-route your investments through parents (Senior Citizens)
Senior citizens have several tax benefits. These benefits are mentioned in the income tax rules. Anyone can gift money to their parents tax-free. The parents have the privilege of re-investing that money. They can invest the funds in schemes for senior citizens. Someone can use this option to re-route their earnings for investment. However, they need to ensure that their parents have low incomes. Otherwise, they will have to pay taxes for this.
- Increase Contribution to National Pension System:
If someone is an NPS subscriber, then they get a few benefits. Then they can do the Income Tax Planning accordingly. Under Section 80CCD(1B), they can get an extra INR 50,000 deduction in one financial year. This deduction is in addition to the INR 1.5 lakh deduction. According to Section 80C, the INR 1.5 lakh deduction is allowed.
- For expenses against internet and telephone, one can save tax:
Under Income Tax Rule 3(7) (ix), employee telephone reimbursement is tax-free. If someone’s work requires using such facilities, they can save tax on it. However, the original bill needs to be submitted to the employer. Only then can they enjoy this benefit.
- Save tax on parents’ health and insurance payments:
For paying health insurance for family and self, anyone can get an INR 25,000 deduction on tax. This is mentioned under Section 80D. Hence one must do Tax Planning accordingly. Anyone can also be titled to the extra tax deduction. They get an additional removal if they pay for their parent’s insurance. This, too, is mentioned in Section 80D. You can claim INR 25,000 if your parents are below 60. And claim a deduction of INR 50,000 if the parents are 60 or above. If someone’s health insurance does not cover their parents, they get an extra deduction. They can claim up to INR 50,000 in a year for medical expenses.
- Save Tax on donations and charity:
You can claim a deduction during ITR Filing if you donate to charities. On specific contributions, you can claim a 100% deduction. And on others, you can claim a 50% deduction. It is eligible for deduction if the donation is made in cheque or cash for up to INR 2000. It is mentioned in tax2win.
- Fixed Deposit for Saving Tax:
While in Tax Planning, one can invest in fixed deposits since they are tax savers. Like this, they can have a tax deduction. It is mentioned under Section 80D. Up to INR 1.5 lakh can be claimed to be invested on tax-saving fixed deposits. There is a tax on the earnings due to the interest. And one gets a lock-in period of 5 years. The interest usually is between 5.5%-7.7%.
- PPF (Public Provident Scheme):
One can consider PPF for tax savings. It is a long-term savings option and is also an investment option. One needs to open a PPF account for this. They can do so in a post office. One can do this in their respective branch of private or public banks. One can claim a deduction of INR 1.5 lakh in a financial year. Section 80C mentions this explicitly.
- Life Insurance:
It is the primary job of the bread earner to get life insurance. It plays an important role in their financial portfolio. On the premiums paid, it offers tax benefits to the policyholder. Insurance can be both traditional and market-linked. Keep this in mind during ITR Filing. It is covered under Section 80C.
There are several plans, like:
1. Money Back Plans.
2. Term plan.
4. Endowment plan.
Regardless of the nature of the plan, policyholders can have tax benefits.
- Mutual Fund for Tax savings:It is also known as ELSS (Equity Linked Savings Scheme). This is suitable for investors ready to take a medium to high risk. The money is invested in the stock market or among other such assets. The period for which the investment is locked is three years. Section 80C covers this plan, and up to INR 1.5 lakh is eligible for deduction.
How can you plan for tax savings for the year?
1st April marks the beginning of the financial year. It is also the beginning of the tax-saving season. It is the same for both self-employed and salaried persons. One should start tax planning right from the start. Other than deductions, tax-saving investments also help to earn tax-free income.
It is wise to invest in the early quarters. It is so that one gets time for Income Tax Planning. Section 80C mentions most of these investment plans. According to it, the taxpayers are eligible for a deduction of up to INR 1.5 lakh.
Here in the article, we discussed various ways to save tax. These measures can help one during ITR filing. This article also talks about the process of having a tax-free income. The different ways of investing to save taxes provide different options. One can choose any one or multiple options based on their needs. If you need help with finances, you can always reach out to a financial expert like Piramal Finance. We will suggest what’s best for you and help take care of your personal loan requirements if any.