How to Save Income Tax in India?
If paying off tax is getting tiring or you are experiencing that a lot of your money is draining in tax payments, then you must know how to save money that you are paying as tax. If you want to know how to save income tax in India, there are many legitimate ways under the income tax act 1961, that you can use to save tax payments. Investing in mutual funds, NPS, insurance, etc. are a few of them. Below are the 7 ways that can help you save tax, in easy and legitimate ways.
1. Save up to Rs. 1.5 Lacs U/S 80C: The Income tax act u/s 80C gives the opportunity to every individual to save up to Rs. 1,50,000 through some expenses or investments discussed under the same section.
- Tax-saving FDs: Choosing a 5-year plan of fixed deposit (FD) is a good way to save tax for up to Rs. 1.5 lacs u/s 80C. However, the interest earned on FDs is subject to tax payments.
- Depositing in PPF: Public Provident fund (PPF) is a government-established savings scheme where you can invest through a bank or post office for up to 15 years. The interest is calculated at 8% per year at present and is exempt from tax computation.
- Buying NSCs: You can invest in the National Saving Certificate (NSC) for up to 5 years and earn a fixed rate of interest. You can show this investment including the interest for up to Rs. 1.5 L and earn tax exemption u/s 80C.
- Life Insurance Premiums: Life Insurance Corporation (LIC) policies are another safe and insured way of investment that you can use to save tax for up to Rs.1.5 L u/s 80C.
- Home Loan Repayment: Repayment of the principal amount of your home loan for up to Rs.1.5 lacs is subject to deduction u/s 80C of income tax act 1961.
2. Paying Health Insurance Premium: Health insurance premium paid for up to Rs. 25,000 is subject to deduction u/s 80D of the income tax act 1961. You can claim this deduction even after claiming deductions for up to Rs. 1.5L u/s 80C. If you are a senior citizen, you can save up to Rs. 50,000. While also, if you are investing for yourself along with senior citizen payments, you can save for up to Rs. 75,000.
3. Deduction for Your Rent Payment: If you have HRA in your salary, you can claim a deduction for that. No maximum limit is applied on this, but a few rules cap the maximum HRA deduction. If you are not getting HRA and paying rent, you can save up to Rs. 60,000 per annum u/s 80GG.
4. Contribution to National Pension Scheme: U/s 80CCD, you can save tax up to Rs. 50,000 by investing in the national pension scheme. Through NPS, you can invest in an equity and debt pension fund and withdraw the full amount at the age of 60 years.
5. Deduction on the Interest Paid on your Home Loan: U/s 80C, you can claim a deduction for the principal amount paid on your home loan. While also, you can claim a deduction for the interest paid on your home loan u/s 24 for up to Rs. 2,00,000.
6. Maintaining your Saving Account: Interest gained on your saving accounts can be claimed for deduction for up to Rs. 10,000. Whereas, if you are a senior citizen, you can save up to Rs. 50,000 as interest earned on your savings account u/s 80 TTB.
7. Contribution to Charity: You can claim up to 50% of the donation made to charitable NGOs and 10% of your total adjustable income. The NGOs must have an 80G registration certificate where you are donating and claiming a deduction.
These methods can be the easy answer on how to save income tax in India, but also there are a few more investment ideas that you can use to save your tax. With your investments in EPF, ELSS funds, Senior citizen saving scheme, Sukanya Samriddhi Yojana, etc. as well, you can save on tax payments fairly.