How to Save Income Tax?

How would you feel if you have to sacrifice a large amount of money without your will? It is harrowing and hurtful when someone takes away your hard-earned money. Every year we go through this same feeling again and again. Yes, you guessed it right!! Its taxes. A report of Times of India states that an average salaried employee has to pay more than 50 percent of their salary as direct and indirect taxes in the form of income tax, service tax, GST, etc. Horrifying Right!! But there are some avenues left which an employee can use and reduce the mammoth burden of taxes. Here in this article, we are going to explore the different ways which can be used to save our hard-earned money and increase our savings.

i). Home Loan- Always dreamt of buying your dream house! Buying a house on loan will not only fulfil your dream of staying in that house, it will also be light on your tax statement. A salaried employee can save Rs. 1, 50,000 taxes under 80c on the payment of principal towards housing loan.

ii). Health Insurance Policy- Residents can claim the premium amount paid towards insurance policy under section 80D. For people whose age are below 60 years of age, the exempted premium amount will be Rs. 25000 and for people above 60, the amount is Rs 50000.

iii). Investments- Some investments in the capital market can help not only in creating wealth but also in saving taxes. The Equity linked saving schemes(ELSS funds) help you save tax under 80C.

iv).Investment in Government Schemes – People can get a good assured return on investment by investing in government schemes and can also save taxes under 80c. The schemes which come under 80C are Senior Citizen Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY), National Pension Scheme (NPS), Public Provident Fund (PPF), National Pension Scheme (NPS)

v). Rented Premises - What if you cannot take loan for your dream house and have to stay in a rented apartment. You can claim Tax exemptions for House rent allowance (HRA) under Section 10(13A). Your salary slip should contain an HRA component to get the compensation for the same. Although, the total tax exemption on rent paid is calculated as the minimum value of three components:

a).Annual HRA received from the employer

b). 50% of the annual salary if the individual is residing in a metro city (40% in case of non-metro cities).

c). Total annual rent should be 10% of the basic salary.

vi). Charity – Doing charity not only makes you feel good but also provide a relief in your tax billing. Donations made to different charitable organisations in cash are eligible for tax waiver amounting to ₹2,000 under Section 80G. Online or bank transactions enjoy complete or partial tax exemptions.

One thing to note here is one can claim a maximum of Rs.1, 50,000 under section 80C.The deadline to file the tax return has been extended till November 30, 2020. Hopefully when you file for tax return in 2021, there will lot of returns you will be expecting based on the above tools of tax savings.

-Nilanjan Kala