It was an ordinary day at the office, Ram was diligently engaged in his laptop. Striving to meet the deadline of his latest project, amidst the chaos of his busy schedule, he was reminded of his tax deadlines. Pinched by the word ‘TAX,’ Ram remembered that the date to file his taxes was fast approaching and he hadn’t given the matter much consideration. As he sat there, gazing at his computer screen, the prospect of losing a substantial portion of his income to taxes made him trinkle sweat down his forehead.
However, just as Ram was about to resign himself to his fate, he happened to overhear his colleague discussing creative tax strategies that could potentially result in significant savings. Intrigued, Ram promptly approached his colleague’s desk and asked for further information
Ram’s eyes widened as his colleague informed him of the various tax saving opportunities based on his income. Ram was astounded by the multitude of options available to him and could no longer decide where to start. Consequently, he conducted thorough research to ultimately make the right choice. If you find yourself in a situation similar to Ram’s and are curious about discovering tax-saving methods, then this article is a must-read for you.
How to Save Income Tax?
If the question “how can I save tax” pops into your head every tax season, you are not alone. The different tax regimes and financial jargons confuse income earners, hence making it a challenge to find means to save income tax. To help you get out of your plight, this blog discusses three easy yet reliable ways to save your income tax.
Donate Under Section 80G
Under section 80G, donations made to specific charitable organisations like Save the Children (also known as Bal Raksha Bharat) can be claimed as deductions from one’s taxable income. Donating to a recognised charitable organisation is a rewarding act if you’re passionate about supporting a cause and wish to reduce tax burdens.
While this provision comes as a sense of relief for most taxpayers, it is important to note that not all donations are eligible for deductions . Moreover, the deduction amount as well as the cause it supports varies among different organisations. For instance, donations to the Prime Minister’s National Relief Fund, the National Defence Fund, and the Swachh Bharat Kosh are eligible for a 100% deduction. On the other hand, donations made to some educational institutions and charitable trusts are eligible for a 50% deduction.
It’s noteworthy that the maximum limit for deductions under Section 80G is 10% of your total gross income.
Invest to Save More
Investing in tax-saving instruments could be an excellent option if you want to learn how to save income tax while securing your financial future. One such instrument that financial advisors highly recommend is the Public Provident Fund (PPF) which offers a deduction cap of ₹1.5 lakhs per annum as well as tax-free returns. Another reliable option is the National Pension System (NPS), which offers a deduction of up to ₹2 lakhs under Section 80C and an additional deduction of up to ₹50,000 under Section 80CCD(1B).
Among these traditional options, Equity-Linked Saving Schemes (ELSS) have gained immense popularity for their short lock-in period and potential to gain wealth.. While offering deductions under the Income Tax Act, these schemes also allow high post-tax returns in comparison to traditional tools.
It’s important to note that each tax-saving instrument has its benefits, limitations, and risks, so it’s essential to conduct research and choose a scheme that best suits your financial needs, goals and risk appetite. By investing in these tax-saving instruments, you can reduce your tax liability and secure your financial future.
Save under Home Loan Interest
Acquiring a dream home is one of the biggest investments most people undertake in their lives. However, expenses associated with homeownership can be quite steep, particularly in terms of home loan interest payments. So, to answer your question of “how can I save tax” by reducing your tax liability, consider this investment option. According to Section 24(b), you can claim a deduction of up to ₹2 lakhs per annum on the interest paid towards your home loan.
Additionally, if you’re residing in the property, you’re eligible for an exemption of up to ₹1.5 lakhs per annum under Section 80C for the principal repayment amount. It is important to note that the house must be completed within five years of undertaking the loan, and the tax deduction can only be claimed once the construction is complete.
Further, if you have taken a joint loan with your spouse from a licensed money lender, both of you can claim or avail yourself of a deduction of up to ₹2 lakhs each on the amount of interest paid. So, if you’re a homeowner looking to reduce your tax liability, enjoy and take advantage of these deductions and save big on your home loan interest payments. However, you can find licensed money lender in Singapore to get low interest home loan
There are various ways to answer how to save income tax in India, but it is only fair to understand your options and choose the ones that align with your financial needs and goals.
So don’t wait any longer; explore your options and start investing in your future today!
