Want To Save Tax In India?
It is always good to pay your taxes on time to the government, but the taxes should not be overpaid. There are many legal ways that can save you from paying unnecessary tax and can reduce your income tax liability in India to the minimum. People who are aware of the income tax liability are able to cope up with their expenses whereas people who don’t know the tax-saving techniques end up being a fool or paying the unnecessary amount. In this article, various ways of how to save income tax will be discussed.
Well, there are several ways (sections under the Indian government) to inform the general people like us about the excellent ways to save income tax in India but many of them are of an advanced level and beyond our understanding that makes us more confused. Thus, to make you understand in a simple manner, here we have mentioned some income tax saving tips in a clear concise manner.
If you too have a tax query, read the below information
1. House Rent Allowance
It is one of the easiest and best ways to save the tax. In your life, you may have come across the term HRA. It is applicable to all who live in a rented apartment. It doesn’t matter if you are living with your parents or they are living with you- The main thing is that the house where you are living should not be owned by you or even if you are living with your guardians then you need to pay them a certain amount that is fixed for every month. But, in a case, if you are married and have got a house in the same locality then the facility of HRA can’t be utilized.
If this is the case at your end, you just need to claim it by submitting the rental receipt (from your parents) to the HR (human resource) department.
Under this the minimum of the three can be exempted:
(a) The actual rent paid by you for your house, deduct 10% of your salary from it (basic + dearness allowance, if any)
(b) The actual HRA received from where you work or from your employer and
(c) 50% of the basic salary (for a metro) or you can say that 40% of your basic salary (for non-metro).
Note: Provisions such as HRA in the form of our salary slips can help save tax to a larger amount.
2. Do lookout for the Education expenses
If you as a parent are paying tuition fees for your child then you must be aware that the tax can be reduced while calculating the taxable income of yours. Don’t be confused with the other things that come along with the school fees. For example transportation fees, library fees. Hence, the only thing that is entitled to tax savings is the tuition fees of your child.
Moreover, if you as a taxpayer have taken an education loan for the higher education of your child or for yourself then you can claim the deduction and save taxes.
3. Leave Travel Allowance and Medical allowance
In your salary slip, you must have noticed provisions such as Leave Travel Allowance and Medical Allowance. Such allowances aren’t noticed by people most of the time. As, it is not noticed by the (people) employees, so, after getting the tax deducted it is paid at the end of the year. And, therefore, at the end of the financial year, you must have observed a minute increase in your salary/ pay structure.
But it is advisable to claim the amount you spend whether it is on medicines or your holidays. Claiming the amount can help you in tax savings.
To claim the amount of your leave travel you have to submit all of your travel documents. And, this applies if you travel within India and not in a roundabout way.
4. Long term capital gains arising from the sale of equity shares/losses of stocks
The government of India has exempted this provision of Income-tax so that the people would be encouraged and would invest their income in mutual funds and equity shares. Looking at the long term capital gains that are arisen from the sales of the equity shares the government decided to exempt the income tax.
(Note: It is applicable only if the shares were held for a time period of more than 1 year and if the shares are held for the period of more than a year, a tax would be levied @ 15%).
5. Home Loans
One of the most feasible methods to save tax in India is on a Home loan. On your home loan, you can save the tax on interest as well as the principal component because the principal amount you have paid could be claimed under the 80G section of the Indian government and that also having an upper limit of Rs.1.5 lakh. And, the interest that you would be paying would also lower the tax liability by up to Rs.2.5 lakh (starting from the year 2016). Now, isn’t that cool?
6. Rajiv Gandhi Equity Saving Scheme
This tax planning is done under section 80CCG. Here, a taxpayer who has an annual income of less than Rs. 12 lakh per annum is permitted for an additional deduction. Under this scheme, they can invest in shares of identified companies and their mutual funds. This tax-saving scheme is available only for the first time investors and people who have already make use of it aren’t allowed to take benefit from it.
7. Perquisites/ Gratuities
Income tax saving can be made easier with the help of perquisites which is offered by the employer. A prerequisite is an advantage provided to you by your company, in accumulation to your salary. It might come in the form of payment of school fees by your company, concessional housing, car loan or a rent-free place. And, some of the incentives are taxed along with your salary, while a few others are exempted to a certain limit.
8. Save tax while ensuring your health
The income tax department takes care of your health as well. It permits deductions and saves your tax if the expenditure has been done to take care of your health. Under this scheme, depending on the type of insurance policy several deductions are allowed that could be of great help in tax saving. It falls under section 80 D, 80DD and 80DDB.
Important queries with respect to how to save income tax in India have been discussed in this article and can help every person in India to save themselves from the extra taxes which may be required by them to pay.
Try our all-in-one Legal Practice Management Software START FREE TRIAL!