- Tips to save income tax:
- Through Investments
- On Rent Payment
- The deduction is allowed if taxable income is:
- By financing Higher Education
- By buying a House
- Criteria as follows:
- Leave Travel Allowance and Medical expenses
- Tax planning from Capital Gain
- Income from Agriculture
- Timely tax declarations and investment
ITR filing online is the lawful duty of every citizen of the country whose income is more than the threshold limit and the person who has to pay income tax can save income tax by filing income tax returns timely. With proper tax planning, you can actually save income tax.
Tips to save income tax:
- Life Insurance
A person can save income tax by investing in life insurance as life insurance premium paid by an individual is eligible to be deducted from taxable income under Section 80C.
- Mutual funds
Section 80C of income tax act allows an investor (in certain funds) to claim the deduction of up to Rs. 1,00,000 from gross income. The investor is not allowed to exit the ELSS before 3 years of the date of investment but can exit after 3 years by selling it. Returns from ELSS are tax-free and save income tax.
Also, the dividends that are received from stocks and mutual funds (equity focused) are tax-free in the hands of the receiver.
- Contribution to EPF account
Employee Provident Fund (EPF) is a beneficial scheme for retirement saving. It is compulsory for in some cases. The employer also contributes an equal amount in the EPF account of the employee. The contribution to EPF by an employer is exempted from tax, while contribution by the employee is tax deductible under section 80C.
- Deposit in PPF account
PPF account is a long term investment scheme run by the government. Anyone can open PPF account in SBI, post offices or other banks. The PPF account gives tax deduction under section 80C.
- Sukanya Samriddhi Account
This is a government saving scheme for the girl child. This scheme gives the highest returns among all the schemes. The investment cannot be withdrawn till girl child is 18. The investment and maturity amount is tax-free.
- Interest Income on Savings Account
The interest income on savings accounts is not taxable up to Rs 10000 and if a person earns Rs 15000 as interest from its savings, then he has to pay tax on only Rs 5000.
- Interest income on NRE Account
NRE account of an NRI is not required to pay tax on the income from interest on the savings or fixed deposits.
On Rent Payment
If you stay in a rented accommodation and receive HRA (house rent allowance) from the employer, you can claim the deduction under Section 10(13A).
- Actual HRA received from the employer.
- The actual rent paid greater than 10% of basic salary.
- 50% of the basic salary if you reside in a metro city and 40% if you reside in a non-metro city.
Also, even if you don’t receive HRA from an employer or do not own a residential house, house rent can be deducted from taxable income under section 80GG.
The deduction is allowed if taxable income is:
- Rs. 60,000 per annum.
- Rent paid minus 10% of adjusted total income.
- 25% of total income for the year.
By financing Higher Education
Under Section 80E, deduction from taxable income is applicable on the interest paid on a loan taken for higher education. The deduction is offered for a maximum of 8 years or till the time the interest is paid, whichever is earlier.
Also, any amount that is received as a scholarship for education is not taxable and it doesn’t matter if it is granted by the government or a private trust.
By buying a House
Under Section 24, tax benefit can be received on home loans for interest payment up to Rs. 2 lakhs. For the first time, home buyers can claim an additional deduction of Rs.50,000 on home loan interest under section 80EE.
Criteria as follows:
- The housing loan must be sanctioned in the FY 2016-17.
- The loan must not be more than Rs. 35 lakh.
- The residential house value should be less than Rs. 50 lakh.
- The home buyer ought not to have any other residential property registered in their name.
Leave Travel Allowance and Medical expenses
Such expenses are deducted from gross salary. An employer may give a part of salary as medical allowance.
Medical allowance is tax-free by producing an actual bill of medical expenses. However, it has a limit of Rs.15,000 in a financial year. Receipts of medical dependents can be provided. Travel allowance is also tax-free under certain conditions as follows:
- limit: 2 times in 4 years.
- The travel should occur when on leave.
- Travel within India.
- Travel should be by the shortest route.
- Can claim for AC-I coach of the train journey and economy class for air travel.
Tax planning from Capital Gain
A taxpayer can plan tax exemption and save income tax from paying capital gain tax if they invest the amount of gain (long term capital gain) from the sale of property in specified instruments.
Income from Agriculture
A person who receives any income through agriculture in the form of any rent derived from land, from agriculture products or from farm building can consider such income to be tax-free.
Due to the absence of inheritance tax in India, the income which is received through inheritance becomes non-taxable income.
Timely tax declarations and investment
Employers have to pay advance tax every quarter. As TDS(Tax Deduction at Source) is deducted every month from salary. If the declaration of planned tax saving, investment, and expenses of the year is not unveiled then the projected tax will be higher.
An employer will start deducting TDS monthly from the first quarter. If you do not declare early then a company may deduct more TDS than needed. So, it is beneficial to give a tax declaration at the beginning of the year.
For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business Return, Bulk Return or Revised Return Filing.