Yesterday I wrote a post about the benefits of filing your IT returns. Today, I wanted to write a follow up post highlighting few ways to save on income tax. Our government has provided certain provisions in this regard which we can use to our benefit.
As a self-employed individual with a registered business I can account business expenses in many ways. But many salaried individuals don't have these options. However, today we will look at some basic ways to save on tax. You can do your due diligence on your own time and consult with your accountant for further guidance.
This post is not an investment advice nor detailed accounting information. But it will give you some general idea on how to proceed if you are completely unaware of such matters.
Tax Saving Under Section 80C, 80CCC, 80CCD.
As per the current rules one can do combined savings under aforementioned sections for upto 1,50,000. You can invest in tax saving instruments such as ELSS Mutual Funds, PPF Account, 5 year Tax Saver Deposit, Life Insurance Policy and others.
Personally I prefer the ELSS Mutual Funds due to their 3 year lock-in period and good return on investment inspite of the 10% capital gain tax currently applicable from this year's budget. The return is higher than any other tax saving instrument even after taxes.
Deductions for Loans
You can do your tax planning based on home loans or car loans. IT Act allows some deductions towards repayment of home loan.
Self-employed individuals can also claim some depreciation on asset as well as loan interest paid. In some cases you can get over 2 lakh in deductions for your home loans. Check with your accountant for the maximum possible deduction.
Tax planning under 80E
Education loan also avails some tax deductions. This benefit is available to individual tax payers. If you have a student loan then you can make it work for you in helping reduce your income tax.
Deductions for Donations under Section 80G
I have a habit of donating a small part of my income on a regular basis. Over the course of the year the amount does add up. Fortunately the government allows me to claim deduction to a certain amount under section 80G of the income tax.
This allows me to help needy organisations in my area which are registered with the government and in return I am also benefitted.
Deductions under Section 80D, 80DD and 80DDB
These sections deal with your medical and health insurance as well as treatment of specified diseases. Government allows different amount of deductions under these sections. So if you are insuring your health then you can get some deductions towards the taxable amount.
There are ofcourse a number of other ways but some of these are not entirely applicable to everyone. Aforementioned sections under the IT Act (Income tax act) are generally applicable to most people.
How to File Tax Returns in India for Your Bitcoin Profits
You can read my story about the same in the quint here!. Please check with your accountant for the changes in tax slabs and percentages and other similar details as there may have been some changes after the recent budget.
You can also do some further reading on tax saving here.
So readers from India what is your preferred way of saving tax?
Would be great to read your responses in the comments below.
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