Tax planning is a useful strategy for saving on taxes and increasing your income. The Income Tax Act provides deductions for various investments, savings, and expenses in a given financial year. We’ll discuss some ways to help you save on taxes.
We often invest in things that improve our lives but can also strain our finances. To ease this burden, the government offers multiple options to save income tax on the money you earn.
Here’re the Five Different Ways to Save Income Tax in India
1. Buying Home Loan
Many government programs, like PMAY or Pradhan Mantri Awas Yojana and DDR Housing Scheme, aim to make housing more accessible in India. Meanwhile, Sections 80C and 24(b) help reduce taxes and ease financial burdens.
You can get tax deductions up to 1.5 lakh for the entire yearly income used to repay the loan principal with Section 80C. And under Section 24(b), you can enjoy tax exemption on the interest paid on your home loan, up to Rs 2 lakh per year.
2. Buying Health Insurance
You can get tax deductions on the part of your yearly taxable income that you spend on insurance premiums through Section 80D. The amount you can claim varies depending on the age of the insured person.
3. Invest in Government Schemes
Many government schemes offer good returns on investments and tax benefits. You can get tax deductions on investments up to Rs 1.5 lakh in a year under Section 80C of the Income Tax Act.
Here’s the list of schemes to invest in:
- Senior Citizen Savings Scheme (SCSS)
- Sukanya Samriddhi Yojana (SSY)
- National Pension Scheme (NPS)
- Public Provident Fund (PPF)
- National Pension Scheme (NPS)
4. Buy Life Insurance Plans
Section 80C is about premium payments, and Section 10(10D) covers the amount received when the insured person either matures their policy or passes away, whichever happens first.
If you bought the insurance after April 1, 2012, you can claim tax benefits on annual premiums up to Rs 1.5 lakh under Section 80C, as long as it’s less than 10% of the total sum assured.
Also read:
VPF vs EPF: Which Offers Max Interest Rate, Main Difference
5. Choose Investment Plans Under Section 80C
Section 80C of the Income Tax Act is a popular option for tax savings in India. It covers various investments and expenses for which you can claim deductions, up to a limit of Rs. 1.5 lakh in a financial year.
Here’re the schemes:
- 5-Year Bank Fixed Deposit
- Public Provident Fund (PPF)
- National Savings Certificate
- National Pension System (NPS)
- ELSS Funds
- Unit Linked Insurance Plan (ULIP)
- Sukanya Samriddhi Yojana (SSY)
- Senior Citizen Saving Scheme (SCSS)
