For every citizen of India be it a businessman or a salaried individual, it is mandatory to pay income taxes annually. It is difficult to opt for a good tax saving or reducing strategy because laws keep changing and upgrading. It is easier to save taxes if you choose the right options for investing. Some investments are free from taxation under the Indian Constitution.
There are various government and private investment schemes like mutual funds, provident funds, health insurance, and life insurance which can be used for investing and saving taxes.
There are some exemptions to part of your earnings. These are mentioned below:-
- Education Loan: Under Section 80E if someone has taken an education loan for children, spouse, oneself etc. he can claim for deduction on the interest rate of the same. This is only available when the loan is taken for higher education. It is available for a period of eight years starting from the year the interest payment started.
- Public Provident Fund (PPF): The public provident fund also called PPF is available in banks and post offices as well. This scheme is by the Government of India and is exempted from taxes. An investment of Rs 5000/- to Rs 60,000/- can be made yearly.
- Home Loan (Under Section 24): The interest paid on home loan is deducted under section 24 of the Income Tax Act. If you have an income from house property, the amount paid as interest on the home loan will be reduced from this income. The same rule applies if a home loan is taken for the purpose of construction, purchase of a house, repair/reconstruction. The maximum amount allowed for deduction is Rs 2,00,000/-. If the property for which the loan has been applied is not self-acquired, there is no specified limit and whole interest amount is eligible for deduction. This deduction has to be computed and claimed every year.
- Equity Linked Savings Scheme (ELSS): This is also known as a tax saver mutual fund and is readily available with various banking and non-banking institutions. Also, there are no limits to investing in ELSS. It mainly offers two schemes- Mutual Funds and Systematic Investment Plan, MFs and SIPs respectively. Moreover, Investing in either can provide an exemption from taxes up to Rs 150,000/-.
- Health insurance: Under Section 80D, if you have health insurance, it is exempted (relieved) from income tax. The total amount of premium paid will be deducted from the salary/income. An individual can avail maximum benefit of 25,000/- for a premium paid for self, spouse or under 18 children. Additional benefits of 25,000/- can be availed for the premium paid for one’s parents. As for senior citizens, this deduction can be up to 50,000/-. If a person has a policy for oneself, spouse and parent, he can claim a total benefit of 75,000/-.
However, not all health insurances are exempted from taxes, it is important to know before investing.
- Education Fees: There is also an exemption of tax for children’s education. A fee of maximum Rs 150,000/- can be exempted for a maximum of two children per taxpayer. This is most beneficial to couples who are both in jobs, but also to single earners because it reduces the tax burden and helps to save.
- Interest on savings account: Under Section 80TTA, interest earned on the savings account is exempted from any taxes. The amount up to 10,000/- can be claimed as a deduction.
For filing tax returns, you don’t have to be in lines anymore. Digital advancements have facilitated the option of online ITR filing. Various income tax calculators are available online, which can help you smoothly file returns.
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