Whether you are an existing taxpayer or are starting now, good tax planning is the key to saving more from your income. Not only can you make the right investments to enjoy tax benefits under various Income Tax Act sections in India, but also enjoy great returns from all your tax-saving instruments and assets in the longer-run.
So, in order to effectively plan your taxes and save money, follow these 5 tips.
1. Increase your Section 80C contributions
When you claim the entire Rs.1,50,000 deduction under Section 80C, you can reduce your tax payable by a considerable amount. You can claim deductions on a list of regular expenses. These expenses can include life insurance premiums, tuition fees for your children, contribution to EPF (Employees Provident Fund), investment in PPF (Public Provident Fund) and certain government schemes. Use these investments or expenses to increase your section 80C contribution and save more.
2. Plan to buy a home
Repayments towards the principal amount of your home loan can be claimed as tax deductions. Additionally, you can also claim the interest paid towards your home loan as tax deductions under Section 24. The maximum deduction in case of repair or reconstruction is Rs.2 lakh. However, you cannot claim tax deductions on the interest paid in such a scenario. If as a salaried employee and are paying rent, you can claim a deduction of the lowest amongst these three:
- HRA (House Rent Allowance) given by the employer
- 50% of the basic salary including DA (Dearness Allowance), in case you are in Delhi, Mumbai, Kolkata, and Chennai. In all the other cases, 40% of the basic salary including DA
- Rent paid by you excluding 10% of basic salary and DA
3. Avail deductions on donations or charities
While donations can make you feel like you’ve made a difference to a cause that is close to your heart, they also allow you to claim tax exemption under Section 80G. If you are donating towards scientific research and rural development, the amount is eligible for deduction under Section 80GGA. You can claim either 100% or 50% of the amount for deduction as per the relevant section under the Income Tax Act.
4. Invest in you and your family’s health
Medical insurance and medical health check-ups are part of the regular expenses you incur. If you are spending money towards medical insurance or a medical check-up, you can get a deduction up to Rs.60,000 under Section 80D. Some other medical-related expenses that are eligible for deductions are medical expenses for a dependent up to Rs.1,25,000, medical expenses of a disabled individual up to Rs.1,25,000 and expenses for certain specified diseases.
5. Claim your expenses towards your child's education
In regard to expenses on your child’s education, you can claim tuition fees as a deduction under Section 80C and the interest paid on higher education loan under Section 80E. If your employer allocates allowances for your child, you can claim it under Section 10 as well.
Keep these points handy and start planning for your savings and investments in advance. This way you can streamline your income and expenses and claim more as tax exemptions, which will help you save more money.
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