Paying taxes is relatable to every earning person. Being a necessary evil, taxes are what help run the economy, much as you’d like to evade them completely. However, the government was kind enough to offer a variety of tax saving strategies as a concession. According to section 80C of the Income Tax Act, a sum total of 1.5 lakh rupees may be invested in all these put together so that the same amount may be deducted from your taxable income. We all know that the simplest way to avoid excess tax payments is to pay on time to avoid interest building up on it. For this purpose, there are tax saving strategies which include the following methods:
- Your best bet is to invest in a public provident fund (PPF) as it guarantees 8.7% tax free compound interest per annum. With a maturity period of 15 years which can be extended to 25, this is a viable source of retirement funds. You could also choose superannuation funds as a pension plan.
- Investing in tax-free bonds, NSCs (National savings certificates) and ELSS (Equity Linked Savings Schemes) are all profitable from the point of tax savings.
- Get tax deductions on life insurance policy of any one of your immediate family members. However, only if premium is less than 10% of the assured sum for all the years will you be able to avail this benefit.
- If you are physically or otherwise disabled, you are liable to receive a tax deduction of up to INR 50,000 on your taxable income. If you are suffering from two different disabilities, you are eligible to receive a tax deduction worth INR 1,00,000 provided you have sufficient proof.
- Save money while creating assets such as a house. You can save money on a second home if you rent it out. This is because you can avail a deduction for interest on the loan.
- Involve your family members in a business you run in order to reduce your own taxable income. This puts you in a lower income category while also providing you the tax deduction benefits of your family members. Hence, the total tax paid by your family will be reduced.
- Choose investments that do not cause clubbing of your children’s income with yours or gift an education loan to your children to reduce taxes incurred.
Want to know your taxes? Access our easy to use tax calculator, and plan your finances.