All You Need to Know About Saving Income Tax

Saving Income Tax
Saving Income Tax

During the time of filing an income tax return, most of us try to find a few ways to save more tax. You can save a good amount of tax if you follow the income tax procedure for saving tax in India.

In this article, we are discussing the possible ways to save income tax under various sections of the income tax law in India.

Recommended ways of saving taxes under Section 80C & 80D

  • To reduce the total taxable income you should invest ₹1.5 lakh under section 80C
  • Get tax benefits under section 80D, you should buy health insurance and claim a tax deduction of ₹25K (₹50K for senior citizen)
  • Under section 80EE you can claim ₹50k on home loan interest

Investment options under Section 80C of Income Tax law

Generally, section 80C of income tax law is the most popular to save tax for individuals in India. The section 80C of income tax offer different types of investment option you can claim tax deduction up to ₹1.5 lakh in a financial year in India.

Below are some of the investment options you can consider in order to save income tax.

InvestmentReturnsLock-in Period
5-Year Bank Fixed Deposit6% to 7%5 years
Public Provident Fund (PPF)7% to 8%15 years
National Savings Certificate7% to 8%5 years
National Pension System (NPS)12% to 14%Till Retirement
ELSS Funds15% to 18%3 years

Other Tax Saving Options in India

The one section 80C deduction you know about to save income tax. However, there are other ways to save tax beyond section 80C.

  • Buy health insurance or medical insurance policy you will get benefits from this and you can save income tax up to ₹25K (₹50K for senior citizen) on the premium of the medical insurance policy.
  • If you are buying your own home with the help of a home loan you can reduce your total taxable income to some extent. Interest on the home loan can be claimed under income from house property and the principal portion can be claimed under the income tax law of section 80C of income tax law up to ₹1.5 lakh

How to Plan Your Income Tax-Saving Investments for the Year?

Starting your tax planning at the beginning of the financial year is the best practice. Some of the taxpayers wait till the last quarter of the financial year and decision in a hurry that may cost them.

Suppose, you have started planning for the investment at the beginning of the year then the investment made can be compounded and this will help you in achieving the long-term financial goals.

One thing you need to remember that tax saving is necessary not a goal itself. Below we have listed some of the possible ways you can start planning for the investment for the year.

  • The first thing comes first, you need to check tax-saving expenses already with you such as insurance premium, EPF contribution, Children’s tuition fees, and home loan repayment, etc.
  • Now, minus the above amount from ₹1.5 lakh to check how much you can invest. You should not invest the total amount of the expenses already covered.
  • You need to choose the investment options based on your risk profile and goal you have. Some of the most popular investments are ELSS funds, NPS, PPF, and Fixed deposits.

Conclusion!

Hope you liked the post and if you follow the above advice you can figure out how to utilize the section 80C limit completely to save income tax. It is the best option to start your investment at the beginning of the financial year so that you can spread your investment over the year. If you start investing at the beginning of the year you cannot get a burden and you can make an informed decision on the investment.

Income Tax saving – FAQs

Q. How Income Tax Works in India?

Ans: It is known that most of us do not want to pay tax on the income we earn. But we should be paying the income tax on time. There are public infrastructures that we are using and to maintain and keep those infrastructures running Government need revenue. Income tax is an important source of income for the Government.

Q. Why are Income Taxpayers Less in Number?

Ans: As per the Government data AY 2014-2015 shows that only approx. 1.5% Indian paying income tax. This is why because India is a developing country and most of the Indian people earn less than ₹2.5 lakh per annum that is the minimum amount to be eligible to pay income tax in India. However, income from agriculture is entirely exempted from tax even it is more than ₹2.5 lakh per annum. Therefore anyone in India able to pay Income tax should be proud to be taxpayers.

Q. What is Legal Tax Avoidance in India?

Ans: In India Government expects you to pay income tax, this also allows you to save income tax in a legal way. If you are not earning more than ₹2.5 lakh per annum, you do not have to pay income tax. People with a total income of more than 2.5 lakh are liable to pay income tax in different tax slabs in India.

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