HOW TO SAVE INCOME TAX

Aside from taxes being seen as a financial burden, a lack of knowledge about tax planning can add to this stress. The vast majority of taxpayers have trouble fitting the tax savings part of their financial puzzle. Maybe it's time to teach students about taxes while they're still in school to prepare them for the taxes they'll inevitably face as adults.

  • Join health insurance: People can claim tax deductions under section 80D for the portion of their annual taxable income that goes towards paying insurance premiums. The amount of exemption from income tax calculation varies depending on the age of the eligible persons.
  • Buying a life insurance plan: Section 80C of the Payment of Insurance Income Tax Act and Section 10(10D) provide that the promised amount shall be received on maturity or premature death of the insured, whichever is earlier. However, if the policy is taken after April 1, 2012, a tax benefit of up to Rs.1.5 million is available on the premium paid annually under section 80C, provided it is less than 10% of the total sum assured.

    If the policy was purchased before April 1, 2012, you can make a claim under section 80C as long as the total premium paid does not exceed 20% of the sum assured.

    Subscription or renewal of life insurance policies and annuity payments to such schemes made through monthly salary are also exempt from tax up to Rs 1.5 lakh under Section 80CCC.
  • Investment options under section 80C: The most common tax saving option available to high net worth individuals and individuals in India is under Section 80C of the Income Tax Act, which covers various investments and expenses that can be deducted (up to Rs. 2 million). 1.5 million per financial year.
  • National pension system: The National Pension Scheme is a pension benefit scheme and is administered and regulated by the Pension Regulatory Fund of India. When you subscribe to NPS, your funds are invested primarily in stocks and bonds, and the value of your investment at maturity is determined by the performance of these asset classes. Currently, equity exposure is capped at 50% to 75%, with a 50% cap for government employees. You can decide how much to invest in each asset class or choose an age-based asset allocation model.

    After reaching the age of 60, you can only withdraw 60% of the maturity amount. The remaining 40% is used to purchase annuities for your pension. Early withdrawal up to 25% is allowed only after 3 years.
  • Decide which debt to pay off first: Since credit cards have higher interest rates than other debts, paying off credit card debt is often the best strategy. 1 Of all the credit cards, the one with the highest interest rate usually costs the most and therefore has priority for repayment.

    Use your debt list to prioritize and rank your debts in the order you want them paid off. You can also pay off debts with smaller balances first. Although it may cost a little more in the long run, paying off a small amount of debt first can boost your confidence.
  • Tax saving FD Invest in taxable fixed deposits and get tax deduction up to Rs 1.5lakh. The interest rate you get is the normal FD rate of 5 years and the lock-in period is 5 years. This means you can't withdraw your money for up to five years. Lump sum deposits are only possible once and cannot be withdrawn in the middle. The minimum investment amount varies from bank to bank, but the maximum amount is capped at 80C that is Rs 150,000. You can reinvest profits or choose monthly or quarterly payments. TDS is applicable on interest earned on FDs, but you can avoid TDS by submitting Form 15G or Form 15H (for senior citizens) to the bank.
  • Mortgage repayment: If you are taking a home loan, the portion of EMI that goes towards principal repayment is eligible for tax deduction under Section 80C. Amounts paid as interest are not subject to tax deduction according to this section.
  • Tuition: You can claim a tax deduction of up to Rs 1.5lakh on the education fees paid for your child's education. These benefits are only available to the individual's parents or guardians and up to two children per person. The amount of the deduction does not depend on the class of the child. However, it must be a full-time course in an Indian school, college, or university. Adoptive, single, and divorced parents can also claim these benefits.
  • General Provident Fund: A Public Provident Fund (PPF) scheme is a long-term investment option that also offers tax benefits. The current interest rate (from April to June 2023) on PPF accounts is 7.1% per annum, compounded annually, with a lock-in period of 15 years. This means you have to invest for 15 years, although partial withdrawals are allowed from year 7 onwards. You can open an account with as little as 100 rupees. The minimum and maximum investment allowed in a financial year is ₹ 500, 1500 and ₹ 1.5lakh respectively. If your annual investment amount is more than 1.5 million rupees, you will not get any interest on the excess amount. You must make at least one deposit per year for 15 years. PPF is considered a safe investment vehicle to save tax. You do not need to pay any deposit or interest tax when withdrawing money.
  • Section 80E: Under Section 80E of the Income Tax Act, the amount spent on repayment of interest on education loans may be deducted from your gross income. This loan must be for the education of yourself, your spouse, child, or student for whom you are a legal guardian and must be approved by a bank or financial institution. The total amount you have paid to repay your loan interest during the year is a deduction and there is no limit to the maximum amount you can claim as a deduction. You must obtain a certificate from the bank that specifies the principal and interest of the repaid education loan.