From loans to investments: Best ways to save taxes this year!
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From loans to investments: Best ways to save taxes this year!

  • Highlights

  • Begin tax planning a year in advance

  • Save according to your taxable income

  • Claim income tax deductions under various heads

  • Home loan & mutual fund investments offer tax savings

Tax planning is a vital step to claiming deductions. This will help you save on taxes while filing your income tax return. Whatever may be your source of income and profile, investments and expenses will allow you to claim deductions from your net income. So, planning ahead of the end of financial year allows you to save prudently.

Take a look at the ways in which you can save income tax in 2018.

Plan on high-gain investments to save tax under Section 80C and its sub sections

All your investments ranging from PPF to mutual funds are allowed for deduction under 80C and its sub sections. The maximum cap to claim exemption is fixed at Rs.1.5 lakh. So, based on your income tax slab, calculate your taxable income and then save accordingly in various instruments that qualify for exemption under this section to reduce your taxable income.

The tuition fees you pay for your children (up to 2) are also considered for deduction under this section. Claim an additional Rs.50,000 under this section by investing in National Pension Scheme (NPS).

Take home loan to claim deductions in three ways

A home loan in your name, or which you jointly take with your spouse, is eligible for deduction under three income tax sections. First, you can claim exemptions on the principal you repay on your home loan for up to Rs.1.5 lakh under Section 80C for a property whose construction has been completed. Secondly, claim the interest you repay on your home loan for up to Rs.2 lakh under Section 24 in case of a self-occupied property. In case you take a home loan for a second property that has been rented out there is no cap on the interest claim. Thirdly, as a first-time home owner you can claim an additional deduction of Rs.50,000 per financial year towards interest payment under Section 80EE. The best part is in case of joint ownership both of you can claim all these benefits equally under the Income Tax Act.

Choose an education loan to benefit from the repayment

Under Section 80E of the Income Tax Act, you can save taxes by claiming deductions on the education loan you take for self, spouse, children, or dependents for whom you are the legal guardian. The principal you repay on the loan is not applicable for any deduction. However, you can claim income tax deductions on the interest you repay on your education loan. There is no maximum cap for this.

These broader categories allow for maximum tax savings under the Income Tax Act for any individual or entity drawing a regular income in India. However, there are several other uncommon yet relevant ways in which you can save tax. Here is a list of what else you can do to claim deductions.
- There is no tax on the rent earned on agricultural land or income from farms. So, you can plan on buying and renting lands for agricultural purposes to save tax.
- You can claim a maximum of Rs.10,000 under Section 80TTA for the interest earned on your savings account.
- You can make donations in cheque to charitable trusts listed on the Income Tax website to claim deductions under Section 80G.
- You can claim deductions up to Rs.3,00,000 under section 80RRB, of the Income Tax Act for the royalties and income earned on patents in your name.

Apart from the ways listed here, you can save taxes in numerous ways based on your income and motivation to save. Just keep an eye on the income tax announcements made by the government and set your financial goals ahead of time to save more.

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