Income tax is one of the most dreaded taxes for the people of India and they look for ways to save on it. Though many people indulge in wrongful means for the same, it can fetch dire consequences. Instead, it is viable to look for legal ways to have to pay the lowest of taxes without inviting any legal implications. If a person does proper planning and uses various tax deductions in the right manner, he can do it same easily.
Here are 10 legal ways to save income tax in India:
1. Section 80 C
A discount of as much as Rs 100000 can be availed by making use of section 80C. This can be done by making healthy investments in options like life insurance, National Saving Certificates, Public Provident Funds and Equity Linked Saving Scheme. Other ways in which this section can be applied is by taking up bank fixed deposits for 5 years and education fees of children, maximum of 2 in number.
2. Sections 80 D and 80 G
In addition to section 80C, you can save on your income tax in India with the help of Section 80 D and Section 80G. While Section 80D enables you to get a deduction of Rs 15000 for medical insurance of self, partner or children and that of Rs 20000 for medical insurance of parents over 65 years of age, section 80 G entitles you to tax deduction on contribution to specific funds as well as charitable services.
3. Home Loans
Making the use of home loans in a proper manner is another legal way to save income tax in the country. The tax payer is given the option to claim a deduction up to Rs 100000 and Rs 150000 as interest rate under section 24.
4. Education Loan under section 80G
If you have procured an education loan, you can get a legal deduction under Section 80 G. The loan may have been taken for higher education purposes of the taxpayer himself, his spouse or children. It is granted on the repayment of the interest rather than that of the loan amount. It applies only to individuals and has no limit related to it.
5. Savings under senior citizen schemes
Senior citizens can benefit from making deposits in saving schemes which have been specifically designed for them. They not only help save income tax in a legal way but also provide high return of 9.2% pa. The interest can be availed on a quarterly basis.
6. Bank FDs
One of the best and most lucrative tax saving schemes comes in the form of bank FDs, which is covered under the section 80 C of the Income Tax act. The deduction can be availed only when the time period of investment is for 5 years. It also yields a healthy rate of interest, between 8.5 % and 9.75 %.
7. Long term capital gains
If you have sold a long term capital asset and have made a gain on it, he can claim an exemption on the tax amount by making an investment of gain from property in some specified instruments. Any asset held by the investor for more than a period of 3 years falls under this category.
8. House Rent Allowance
If you are a salaried employee and paying rent without getting house rent allowance from the employer, you can claim tax reduction under section 80 GG.
9. Reconstruction of salary
Reconstructing your salary is another way to save tax in a legal manner. Here, transportation, education, medical and food allowances can be used to take advantage of tax reduction clauses.
10. Contribution to IRA
Another method to help salaried professional to save on income tax is to contribute to Individual Retirement Accounts, which not only help them save for the retirement period, but also bring down the tax liability in the present time.
With some smart planning and a good deal of information, saving tax without raising legal implications is no longer a hard job.