Given a choice, most of us wouldn’t pay Income Tax Act; however, these taxes help in civic activities of the nation, building good infrastructure, spending funds on roads, health, education etc. Thus, as a responsible citizen of the country, it is our responsibility to pay Income taxes. As per the Income Tax Act, if our annual income exceeds our salary and other investments exceed Rs 2.5 Lakhs, then individuals need to file Income Tax returns. As paying taxes is our responsibility, saving taxes is our right that we must fulfil.
Here are some tips that one must follow for smart tax saving:
It is crucial to plan all your investments to save taxes; deciding at the end of the financial year isn’t a smart decision. You can expect to save taxes based on the following parameters.
- If you have already taken insurance or invested in any scheme, you must calculate the tax deductions on these schemes.
- If you are still eligible for other deductions, then you must plan ways and how and when to invest your excess funds to fall below the tax slab category.
Investments where you can claim tax deductions:
- Under Sec 80 C of the Income Tax Act, you can claim tax deductions up to Rs. 1.5 Lakhs if you have invested in tax saving schemes. You can invest your funds in PPF( Public Provident Funds), Equity-linked mutual funds, EPF( Employee Provident Fund), National Pension Scheme or Life Insurance premiums or on tuition fees of your children. There is a medium for income tax filing which needs to be followed.
- If you have taken a home loan, you can claim tax deductions on the principal amount, interest paid. You can claim tax deductions up to Rs 2 Lakhs on interest paid towards a home loan. Under Section 24 of the Income Tax Act, the borrowers can claim tax deductions up to Rs. 1.5 lakhs on paying the principal amount of the home loan. Further, tax relaxations are also applicable to the stamp duty, and registration charges paid towards the home loan.
- You can also claim tax deductions if you have taken medical or health insurance. For self, spouse and children you are eligible for tax benefits up to Rs. 25,000. If you have taken health insurance for your parents, you can get additional tax deductions upto Rs 25,000, and this amount can be Rs 50,000 if your parent is a senior citizen.
- Under Sec 10(13A), you can claim income tax deductions on your rent allowances if you are living in a rental house.
- You can also claim income tax deductions on the travel expenses which are incurred during the leave. The tax deductions are available on domestic travel through any mode of transport such as railway, air travel, or public transport.
- Under Sec 80G of the Income Tax Act, you can claim tax deductions if you have contributed your funds for donations or charity. Under certain government funds, you can claim tax deductions up to 100%.
- The interest paid on education loan is eligible for tax deductions up to 8 years. There is no cap on the maximum amount that can be claimed for tax deductions. However, only individuals can claim tax benefits for educational loans.
- Under Sec 80TTB, senior citizens can claim tax benefits up to Rs. 50,000 if they have an investment in fixed deposits or any other senior citizen schemes.
Thus, you can choose an investment plan that suits your financial goal and plan. If you don’t want to take any risk, you can invest your funds in schemes such as PPF and on the other hand, you can also choose investment plans if you are ready to take risks.