People are constantly looking for methods to save money on their taxes with the help of tax saving schemes. Nobody wants to pass up opportunities to save money on taxes. Different folks choose different approaches. Sometimes they just adhere to the procedures they are familiar with, and as a consequence, they lose out on more effective ways of saving on tax.
As a result, this essay is aimed at people who wish to learn more about methods and means of saving money paid as income tax. If you’re wondering how to avoid income tax in India, keep reading to learn about tax breaks for company owners and salaried staff.
Deductions under Section 80C, Section 80CCC and Section 80CCD
These three areas allow Indian citizens to save money on their taxes by using tax saving schemes. People who have invested money in the instruments described in Sections 80C, 80CCC, and 80CCD may claim specific deductions. PPF Accounts, Pension Plans, Life Insurance Policies, NSC (National Savings Certificate, 5 Year Tax Saving Fixed Deposit, and so on are common vehicles in which individuals invest.
Citizens may claim a maximum deduction of Rs.150,000 under one or more provisions or all three sections combined. Individuals who invest in the National Pension Scheme are eligible for an extra deduction of Rs.50,000 under Section 80CCD.
Taxpayers who have spent money on medical treatments may be able to save money on their taxes. People’s medical costs become tax-free if they present their medical bills. Employers also give Medical Allowance to all workers. The highest amount that may be claimed to utilise medical bills in a calendar year is Rs.15,000.
The Income Tax Act permits deductions under Sections 80D, 80DD, and 80DDB on income spent by taxpayers to ensure their own or a relative’s health. The amount deducted varies by section and is determined by the kind of insurance policy obtained by the taxpayer.
Most individuals are encouraged to save tax by taking out a house loan since deductions may be claimed under three areas, resulting in significant savings. When consumers take out a house loan, they can deduct the principal loan amount under Section 80C of the Income Tax Act.
Section 24 permits homeowners to deduct the interest they have paid on their mortgages. In certain circumstances, a maximum deduction of Rs.2,00,000 is permitted, while in others, there is no maximum restriction on the deduction that may be claimed on the amount spent on paying the house loan interest.
People may avoid taxes by taking out an education loan for themselves, their children, or their spouse. Section 80E of the Income Tax Act permits taxpayers to claim a deduction for the amount spent on loan interest payments. There is no upper limit to the number of deductions someone may claim. Individual taxpayers are the only ones who may claim deductions under Section 80E.
Shares and Mutual Funds
People may avoid taxes by investing in stocks and mutual funds. Citizens earning less than Rs.12 lakhs per year are eligible for an extra deduction under Section 80CCG of the Income Tax Act if they invest in shares of certain firms and certain mutual funds. The deductions are accessible solely to first-time investors under the Rajiv Gandhi Equity Savings Scheme.
Long Term Capital Gains
Taxpayers may save money on tax saving schemes by selling a long-term capital asset and investing the proceeds in certain securities. A long-term capital asset is any asset that the taxpayer has held for more than three years.
Sale of Equity Shares
To encourage citizens to participate in equity shares and mutual funds, the Indian government has exempted any long-term profits from the sale of equity shares from taxation. The tax saving schemes are only waived if the shares are held for more than a year.
Citizens of India may save money on taxes by claiming deductions on the amount they spent on donations if they donate money for social or charitable reasons or make contributions to the National Relief Fund. Section 80G of the Income Tax Act allows them to claim such deductions.
The Ministry of Finance lists the organisations to which taxpayers may give and whether or not deductions are authorised depending on the money’s reason. People cannot claim tax deductions for in-kind contributions, and this is a tax saving scheme.
House Rent Allowance
Employees in India are entitled to House Rent Allowance (HRA), which is deducted from their pay. HRA allows consumers to save money on taxes since it may be claimed under the deductions section by tax saving schemes.
Individuals who pay more than Rs.1 lakh in rent in a year must present documentation such as a house owner’s PAN card, a lease agreement, and so on. Furthermore, individuals cannot claim the whole HRA amount provided by their employer, but only the lowest of the following:
The employer gave the actual HRA. 50% of the minimum wage plus DA (if the employee is in Mumbai, Delhi, Chennai or Kolkata). 40% of the base wage + DA (if the employee is in another city). Actual house rent minus 10% of base earnings + DA.
Income Tax Calculator
An income tax calculator is a simple tool for calculating taxes online. Income tax calculation does not have to be a difficult procedure. Do your tax calculation online in minutes with an income tax calculator that is accurate, simple, and up to date with the most recent income tax from salary rates and laws.
The Union Budget 2022 created a new tax system to determine how much income tax you must pay from your paycheck. Our income tax calculator enables you to comprehend the precise tax structure, how the old and new regimes affect your income tax calculation, and how to conveniently compute income tax online.
Calculate tax online using our simple and free income tax calculator to receive an exact estimate of how much you owe in income tax on your salary and other sources of income.
Wrapping It Up
If you are a salaried person earning between Rs 5 lakh and Rs 15 lakh net pay per year, you must first understand your current tax due.
Once you’ve determined how much tax you’ll have to pay, you should make a strategy to save money by taking advantage of tax breaks under the applicable sections of the Income Tax Act.
You may maximise your tax savings by investing in tax saving schemes, making voluntary gifts, taking out a house loan, or asking your employer to restructure your compensation.