Everything You Need to Know About Saving Income Tax

“A penny saved is a penny earned,” as the adage goes. Tax planning is one of the methods for lowering your taxes and increasing your income. The income tax legislation allows a taxpayer to deduct certain investments, savings, and expenditures made during a given fiscal year. We’ll go over some of the ways you can save money on taxes.

How does Income Tax work in India?

Most of us would prefer not to pay tax on our earnings if we had the option. However, we should. As Indian citizens, we use the country’s public infrastructure and services, and income tax is a significant source of money for the government. As a result, it is our obligation and responsibility to contribute to the construction and maintenance of public infrastructure. That is ensured by timely payment of income tax and filing of income tax returns.

Recommended ways of saving taxes under Sec 80C,80D and 80EE

• Make a Rs.1.5 lakh investment under Sec 80C to lower your taxable income. Investing in NPS under 80CCD allows you to claim an additional deduction of Rs.50,000. (1b).
• Section 80D allows a maximum deduction of Rs.1,00,000 (Rs.50,000 for self and family if senior citizen, and Rs.50,000 for senior citizen parents) for medical insurance purchases.
• Section 80EE allows you to deduct up to Rs.50,000 in home loan interest.

Tax Saving options beyond Sec 80C

• The premium for medical insurance will be claimed at Rs.50,000. (Rs.25000 for self, spouse, and children; Rs.25000 for dependent parents under the age of 60). If you are a senior person, you can claim a maximum of Rs.1,00,000 in medical insurance premiums every year. Medical expenses paid by older individuals can be claimed under section 80D up to Rs.50,000 if they are not covered by any health insurance.
• Up to Rs.2 lakhs in interest on a home loan can be claimed as a deduction under section 24. Section 80EE also permits you to deduct up to Rs.50,000 in interest on a house loan that exceeds the maximum set by section 24. The eligibility for additional interest of Rs.1.5 lakh on the acquisition of a new home under the Section 80EEA affordable housing initiative has been extended until March 31, 2022.
• A home loan can also assist you to reduce your taxable income by allowing you to claim the principal amount of the loan under Section 80C up to Rs.1.5 lakh and the interest portion as a deduction from income from housing property.
• Section 80G allows you to deduct any charitable contributions you make to notified institutions or funds.
• Section 80E allows you to deduct interest paid on a student loan.

What do you mean by 80C deduction under chapter VI A?

When a taxpayer makes certain investments or eligible expenditures allowed under Chapter VI A, the IRS permits the person to reduce his or her taxable income. PPF, EPF, LIC premium, Equity-linked saving scheme, principal amount payment towards home loan, stamp duty and registration charges for property purchase, Sukanya Samriddhi Yojana (SSY), National saving certificate (NSC), Senior citizen savings scheme (SCSS), ULIP, tax saving FD for 5 years, Infrastructure bonds, etc. are all eligible for deduction under section 80C.

How to plan your tax-saving investments for the year?

The beginning of the fiscal year is the perfect time to start thinking about tax-saving initiatives.

Most people wait until the last quarter of the year to file their taxes, resulting in hasty decisions. Instead, if you prepare ahead of time at the beginning of the year, your investments will compound and help you attain long-term objectives. Remember that saving money on taxes is a bonus, not a goal in and of itself.

Use the guidelines below to develop your tax-saving strategy for the year:

• Examine your current tax-saving expenses, such as insurance premiums, children’s tuition fees, EPF contributions, home loan repayment, and so on.
• To figure out how much to invest, subtract this amount from Rs.1.5 lakh. If your expenses exceed the cap, you don’t have to invest the entire amount.
• Choose tax-advantaged investments based on your objectives and risk tolerance. Popular options include ELSS funds, PPF, NPS, and term deposits.

You’ll be able to figure out how to go beyond the 80C barrier this way. It is recommended to start investing in the first quarter of the fiscal year so that your investments can be spread out over the year. You won’t be burdened at the end of the year if you do this, and you’ll be able to make more educated investing selections.