As July knocks on your door every year, so does the need to file your tax returns. Pull up your sleeves and file your ITR asap! The stress doesn't end with filing for tax returns but extensively involves you to find means to reduce income tax. So while you’re at it, why don’t you figure out some better ways to save income tax?
That's why mymoneykarma is here for you. Whether you’re a veteran taxpayer or a newbie - you need to plan your investments correctly to reduce income tax. The income tax laws may appear intimidating but behold and read more to unveil 25 amazing ways to save more.
Little efforts and voila! Let's look at the ways to reduce income tax that can help you save a chunk of your salary to tick off the next thing from your checklist.
1. Tuition Fees
Income Tax laws provide the opportunity to compensate for the expenses you incur on your kid's tuition fees by including them while filing ITR. You can claim this deduction through section 80C of the Income Tax Act and reduce income tax.
2. Deduction on Rent Paid (apart from HRA)
As per the provisions mentioned in section 80GG of the IT Act, you can still get a tax benefit and need not be flustered if you don’t get HRA in your salary. You can claim a deduction of up to Rs.5000 a month under this clause.
3. Repayment of Home Loan
Did you know that your home loan can help you save income tax?
Fascinating, right? You can get tax benefits on both principal and interest components of your home loan installments. You can claim these deductions under section 80C, section 24, and section 80EE of the IT Act.
4. Repayment of Education Loan
Most youngsters resort to education loan to curb the rising costs of educational courses. Such deductions are also available on your education loan EMIs and can help you save a lot. All these deductions are available under section 80E to provide you a tax benefit for interest paid on education loan.
5. Pension Funds
Did you know that your retirement plan can also save you from the burden of income tax?
One of the best ways to secure your life after retirement is to start investing in pension funds. And investing in pension funds helps you to reduce income taxes. You can enjoy such tax benefits under section 80C / 80CCC / 80CCD(1) / 80CCD(1B) / 80CCD(2).
6. Health Check-up & Medical Insurance
Health is wealth!
It is genuinely applicable when you are hunting for means to save income tax. Jokes apart - according to the income tax laws, these expenses can help you get a deduction of up to Rs 60,000 under section 80D of the Income Tax Act if the necessary documents are provided.
Now let’s move on to some lesser known tax -saving hacks.
7. Medical Expenses of Disabled Dependent
If you have a dependent person in your family who is suffering from a disability, then the IT laws let you avail tax benefit under section 80DD. This deduction is meant to help you take care of your disabled family member who is dependent on you, and it can also help you save up to Rs 1,25,000 from your taxable income.
8. Medical Expenses of a Disabled Individual
Similar to deductions under section 80DD, individuals who are suffering from a disability also get to avail tax benefit under section 80U. These provisions help you save up to Rs 1,25,000 from your taxable income and reduce income tax.
9. Treatment for Specified Diseases
Specific diseases or ailments, like HIV-AIDS or cancer, also let you avail tax benefit under section 80DDB based on expenses incurred.
10. Charitable Donations
If you willingly want to help the people in need, then there is another reason to rejoice. While donating, you not only get to achieve your inner peace but also get to save income tax. Several types of donations are entirely exempted under Sec 80G of the Income Tax Act. However, there is an upper limit on cash donations and capped at 10% of the gross total income.
11. Donations for Scientific Research or Rural Development
Any contribution that you make for any scientific research or rural development is also eligible for deduction under section 80GGA.
Now, let's delve into some of the best and most popular tax-saving investments under 80C.
Most employers open an EPF account for you, which means that you are already contributing to your provident fund. Hence, the contribution that you make to your EPF can be claimed as a deduction under section 80C to save income tax.
Those who do not have EPF deductions or those who wish to invest more than the customary EPF deductions may choose to open a voluntary provident fund account (VPF). You can voluntarily invest more (up to 100% of your basic salary + DA). VPF earns you a tax-free interest at 8.4%, and this can help you save a significant amount.
Other than PF, another option is to invest in public provident fund or PPF. Just like PF, you can get a tax deduction on your contributions while the resulting interest income & maturity amount stay exempted from tax.
14. Sukanya Samriddhi Scheme
This scheme is only available for parents or guardians of a girl child and is one of the best tax saving investment options and that help you to save considerably.
NPS or National Pension Scheme is a saving scheme offered by the postal department. It is considered to be a saving scheme with zero risks and is also eligible for 80C deduction.
16. FDs and ELSS
Bank FDs that have a lock-in period of 5 years and certain Mutual Fund SIPs that have a 3-years lock-in period are eligible for income tax deduction under section 80C.
17. Post Office Deposit Account
You can also open five years fixed deposits with any branch of Indian Post Office, and it would work like any other fixed deposit account. But, there's a catch - this deposit account will have a lock-in period of five years, and it offers double the benefit of return on investment. A sure shot way to save income tax and grow your money.
Salaried individuals get access to these additional tax benefits:
18. HRA Deduction for Rent Paid
You can claim the HRA allowance in your salary as a tax deduction if you live in a rented apartment.
19. LTA Deduction for Travel Expenses
LTA can fetch you additional tax benefits. The LTA concession can be claimed for two journeys in a tenure of 4 years, and this can be claimed as a deduction.
20. Tax Benefit on Gratuity
Gratuity received on retirement or termination or on becoming incapacitated or any amount received by the widow of the deceased employee, children or dependents is tax-exempt up to Rs 10,00,000. But, this is subject to various clauses.
21. Meal Coupons
Various employers provide meal coupons like Sodexo or Food cards to their employees. These aren’t taxable up to Rs 2,600 a month, which helps you save income tax.
22. Medical Bills and Daily Travel Allowance
A Standard Deduction of Rs 40,000 has replaced the erstwhile conveyance allowance & medical reimbursement, and the change in the law has been applicable since FY 2018-19.
23. Car Leased by Employer
Several employers offer car purchase or services to their employees, which can help them save tax and money on several fronts. However, those who avail of this facility cannot take the benefit of daily travel allowance.
24. Internet or Phone Expenses
Expenses incurred in using the phone and internet devices provided by the employer can be included while filing ITR and can be claimed to reduce income tax.
25. Salary Restructuring
While switching jobs, it is always a great idea to restructure your salary to maximize the take-home pay and minimize the tax outgo.
Filing taxes and looking for optimum tax-saving options can get on to your nerves. mymoneykarma helps you with both. Save your time and be relieved from all the stress with mymoneykarma. Our tax filing tool makes your life a lot easier and let you optimize your tax life. Our financial ‘gyaan’ helps you optimize your savings.