15 Legitimate Ways to Save Tax
Have you been paying taxes but paying too much? Did you know there are ways to save tax without breaking the law? In this article, we will discuss legitimate ways to save tax. Plan your taxes and claim your benefits. Your future will thank you for this.Plan your taxes and claim your benefits. Your future will thank you for this. Click To Tweet
How do I save on tax? What are the benefits of investing and what are the common tax benefits one can claim to save tax? Read below.
House Rent Allowance: Though HRA is part of the salary, unlike basic pay, it’s considered separately. If the assessee is paying rent, the allowance can be claimed against money paid as rent, subject to conditions. If the assessee has his own house and doesn’t pay rent, this deduction is not applicable.
Repayment of Housing Loan: There are two components in repayment of housing loan.
- Repayment of the principal amount and
- Repayment of EMI on house loan
Deductions can be claimed against interest and principal amount to save tax, subject to conditions.
Travel expenses: Traveling expenses related to your business can be claimed as the tax benefit. It can significantly decrease your tax outgo. Travelling expenses must be purely related to your business and pleasure trips cannot be claimed as business expenses.
Medical expenses: Tax deductions are available against health insurance premium paid by HUF and Individuals.
Pension funds: Contribution you make to your pension fund amount is eligible for deductions. This includes the contribution to LIC Pension fund or any other pension scheme offered by private sector insurers.
Donations to charitable trusts: Under section 80G of the act, any donation to charitable trusts can be claimed for deductions. Make sure to transfer through the bank if you’re donating more than Rs.2000 to claim the tax benefit.
Interest on education loan: Interest on education loan for higher studies in India or abroad are eligible for deductions and one can avail benefits to save tax. The entire interest paid will be deducted. It can be claimed against the loan of self, spouse, or children.
Payment of tuition fee: Tuition fee takes a huge dig in your pocket but did you know you can claim benefits against your fee expenses? If you have children going to school, their tuition fee can be claimed for deductions.
There are various investment options for reducing tax outgo. Some are discussed below.
National Pension Scheme (NPS): Investing in National Pension Scheme allows you to reduce the tax burden. It’s a central government Scheme for government employees as well as citizens working in private sector. It is a very useful consideration in your tax planning as it will give you a guaranteed pension income during your retirement as well as a good tax saving option too.
Post office term deposit (5 Years): Term Deposit (TD) in the post office for a term of 5 years can be claimed as the tax benefit. There is no limit to deposit in this scheme.
Public Provident Fund (PPF): It’s one of the most popular tax-saving options for individuals. If you invest in this scheme, both maturity, as well as interest earned, is tax-free.
Employees Provident Fund (EPF): This involuntary Scheme allows taxpayers to claim benefits. Employees share up to 1.5 lakhs per year is allowed in this scheme. Interest generated will also be claimed.
Equity Linked Investment Scheme (ELSS): Investments in Equity Linked Savings Scheme is a scheme that helps is the creation of long-term wealth as well as reduces tax outgo. It has a lock period of three years, and in the long run, it can fetch a good amount of money. Such investments are deducted for tax benefits.
Unit Linked Insurance Plan (ULIP): ULIP is a combination of insurance and investment. It has a lock-in period of 5 years. The maturity amount will be tax-free.
National Savings Certificate (NSC): In this scheme, there will be no limit for investments. It’s designed for salaried people as well as businessmen.