You work tirelessly all year, but when you are ready to file your taxes, it might look like a big amount of your earnings gets slipped away.
It is a common story for many – balancing bills, savings and expenses and then realising that a substantial part of your income is paid in taxes. The frustration is real, though it mustn’t be like this. Some wise planning could bring down your tax liability so more of your cash stays with you.
Also Read: How To Secure CSR Funds for an NGO
Why Save Taxes?
Tax-saving is about utilising the provisions in the law to lower tax liabilities. What this means is more cash on your objectives, such as purchasing a house, investing in your children’s education or just building a monetary cushion for the long term. The cash saved from taxation can be invested to develop your wealth in the long run.
Additionally to this, tax planning helps you handle your cash more effectively. By knowing and working with the tax savings options available, you can defeat the last-minute rush and stress of tax season.
How You Can Save Tax from Your Income
Listed here are 5 suggestions to save on taxes:
Put Your Money Into Tax Saving Instruments
Among the most well-known and efficient methods to bring down tax income is through investing in tax-saving instruments. The following are options:
- Public Provident Fund (PPF): PPF is a long-term investment system which offers tax advantages under Section 80C of The Income Tax Act. You can invest as much as 1.5 lakh annually, and that is tax deductible. The interest earned and the maturity amount is also tax-free, making PPF a safe tax-efficient investment.
- National Pension System (NPS): NPS is a government-backed Pension scheme which enables you to get Section 80C deductions and an extra 50,000 under Section 80CCD (1B).
- Tax-Saver Fixed Deposits (FDs): Banks offer tax-free FDs with a 5-year lock-in that are deductible under Section 80C.
- Equity-Linked Savings Scheme ELSS: ELSS is a kind of mutual fund subject to Section 80C tax deductions. It has a 3-year lock-in and potentially higher returns since it’s invested in equities.
Claim Deductions from Home Loan Payment Interest
In case you have a house mortgage, you can deduct both the interest and also the principal repayment.
- Interest on Home Loan: you could deduct as much as two lakh every year on interest on your Home Loan Under Section 24 (b) of the Income Tax Act.
- Principal Repayment: the principal part of your home loan EMIs could be deductible under Section 80C up to 1.5 lakh.
- Extra First-Time Homebuyer Deductions: First-time homebuyers may claim extra deductions under Section 80EE or Section 80EEA based on when the loan was sanctioned.
Use Health Insurance Premiums
Health insurance covers your financial needs in case of a medical emergency but also pays taxes:
- Deductions under Section 80D: Premiums paid for medical care plans on your own, your partner, kids and parents are deductible under Section 80D. The maximum deduction will be 25,000 for people and 50,000 for seniors.
- Preventive Health Check-Up: Section 80D also allows a deduction of up to 5,000 for preventive Health checks within the overall limit.
Claim Deductions on Rent
Renters who pay Rent might be able to claim tax deductions even in case you do not receive a House rent Allowance (HRA):
- Section 80GG Deductions: You can deduct rent paid in case you don’t get HRA and don’t own a residential property at the location of employment. The deduction is restricted to 5,000 a month, 25% of your overall income or the rent given minus 10% of your total income.
- Conditions to Claim 80GG: To claim this deduction, you must complete a Form 10BA declaring you don’t get HRA and do not own a home at your workplace.
Donate to NGOs / Charitable Organisations
Donations to registered charitable organisations and NGOs can help you help the social causes you care about and lower your tax income too:
- Deductions under Section 80G: Donations to specified funds, charitable institutions or NGOs are deductible under Section 80G. You can claim a 50% or 100% deduction based on the organisation. For instance, contributions to the Prime Minister’s National Relief Fund get a 100% deductibility.
- Documentation: You need a receipt from the organisation together with the title, PAN of the organisation and the amount donated to claim the deduction. Register the organisation under Section 80 G to receive the deduction.
Final Thoughts
Tax saving need not be a challenging task. With the proper strategy and some planning, you can bring down your tax burden and earn much more cash. The key is to begin early and explore your options. Understanding the tax-saving choices and making the correct choices will keep much more of your income in the right place.
Donate with Aashritha Charitable Trust today. We’re sanctioned under Section 80G and your donation is deductible. Your contributions assist with Elderly Care, Hunger Elimination and Education for Underprivileged Kids. Want to Volunteer? Join us at our volunteer website.
Also Read: How To Save Tax By Donating to NGO
