People always search for savings income tax by various methods with different perspectives. But, sometimes they missed the opportunities to save more for limited knowledge. In this article showing the 19 income tax saving tips that also returns good benefits. If you are thinking about how to save income tax please read this 19 points for business and salaried persons.
- What is Income Tax?
- Income tax saving tips:
- 1. Tax Planning Through Home Loan:
- 2. Income Through Savings Account Interest:
- 3. By Investing Tax-Saving Instruments:
- 4. Extra Contribution to National Pension Scheme:
- 5. Loan for Education Purpose:
- 6. Health Insurance Premium:
- 7. Saving through HRA:
- 8. Standard Deduction:
- List of non-taxable income:
- 9. Money Received from Life Insurance Policy:
- 10. Scholarship for Education:
- 11. Wedding Gift:
- 12. Income from Agriculture:
- 13. Amount Received Through Inheritance:
- 14. Amount Received from Gratuity:
- 15. Amount Received from Commutation of Pension:
- Expenses deducted from tax:
- 16. Expenses to treat Disabled Dependent:
- 17. Expenses for Treating Specific Diseases:
- 18. Money Spent on Donation to Charity:
- 19. Money Spent on Donation to Political Party:
- FAQs about Income tax saving tips:
What is Income Tax?
Income tax is a type of tax which someone pays from his/ her portion of income. This tax is collected by the Income Tax Department of India for Indian Government.
Income tax saving tips:
There are 19 income tax saving tips for business and salaried person. Please read ahead and do which is applicable to you.
1. Tax Planning Through Home Loan:
You can save income tax, if you have a good planning to availing Home Loan. Income tax saving tips without home loan is not a completed. The principle of the Home Loan up to Rs. 1.5 lakh deducted under section 80C of the income tax act and the interest of the home loan deducted from gross income separately under section 24 of the income tax act.
2. Income Through Savings Account Interest:
Overall, interest earned on a savings account is exempt for taxation purposes for a limit of Rs. 10000. This amount is cumulative of all saving bank accounts. This limit extends to Rs. 50000 in the case of senior citizens.
3. By Investing Tax-Saving Instruments:
Any one can invest to a good savings funds like Public Provident Fund/ PPF, General Provident Fund/ GPF, Employees Provident Fund/, Any Life Insurance Fund under section 80C of the Income Tax Act. Under section 80C anyone can exempt Rs.1.5 lakh from his/ her income. Here is a list of popular investment options to save tax under section 80C.
- Public Provident Fund
- National Pension Scheme
- Premium Paid for Life Insurance policy
- National Savings Certificate
- Equity Linked Savings Scheme
- Home loan’s principal amount
- Fixed deposit for a duration of five years
- Sukanya Samariddhi account
- Children’s tuition fees
Here is a table to compare how much it returns with the lock in period.
|5-Year Bank Fixed Deposit||6% to 7%||5 years|
|Public Provident Fund (PPF)||7% to 8%||15 years|
|National Savings Certificate||7% to 8%||5 years|
|National Pension System (NPS)||12% to 14%||Till Retirement|
|Mutual Funds or ELSS Funds||15% to 18%||3 years|
4. Extra Contribution to National Pension Scheme:
If you have contributed 1.5 lakh in the tax saving instruments stated above under section 80C, you can contribute up to Rs. 50000/- extra into the National Pension Scheme, as this amount will be tax free.
5. Loan for Education Purpose:
The interest paid on Education Loan is tax free under section 80E of the income tax act. There is no limit of such category.
6. Health Insurance Premium:
Every individual or HUF can claim a deduction from their total income for medical insurance premiums paid in any given year under Section 80D. The deduction benefit is also available for buying the policy with spouse, or your dependent children or parent.
7. Saving through HRA:
When HRA is a part of salary, if you reside in a rented place, can avail House Rent Exemption under section 10(13A).
8. Standard Deduction:
There is a standard deduction of Rs. 50000. This is the maximum amount for all salaried person only.
List of non-taxable income:
9. Money Received from Life Insurance Policy:
Money received on maturity of Life Insurance Policy is exempt from tax if the premium doesn’t exceed 20% of the sum insured. This applies to policies issued before 1 April 2012. In case of policies issued after 1 April 2012, the percentage drops to 15.
10. Scholarship for Education:
This amount is tax free under section 10(16). There is no limit, the entire amount received is tax free.
11. Wedding Gift:
Wedding Gifts received is tax free under section 56(2). Be it a gift, cash, or cheque, gifts received on getting married do not attract tax. Such gifts can be from your relatives or friends.
12. Income from Agriculture:
Any kind of income from agricultural land defined as per section 10(1) is exempted from tax.
13. Amount Received Through Inheritance:
The amount received through inheritance in the form of a Will is not taxable.
14. Amount Received from Gratuity:
Money received as gratuity is tax-free up to a limit. The limit for tax-free gratuity is Rs. 20 lakhs.
15. Amount Received from Commutation of Pension:
The commuted pension is fully exempt from income tax for government employees.
Expenses deducted from tax:
16. Expenses to treat Disabled Dependent:
Such deductions are a part of Section 80DD. Fixed deductions of Rs. 75000 are allocated for a person with 40 to 80% disability and Rs. 125000 for more than 80% disability.
17. Expenses for Treating Specific Diseases:
This deduction is part of Section 80DDB. Tax benefits are applicable for expenses incurred towards treating specific diseases such as Dementia, Cancer, Aids, etc. For such diseases, tax deductions up to Rs. 40000 are applicable. In case the expenses are for a dependent senior citizen, then the amount increases to Rs. 1 lakh.
18. Money Spent on Donation to Charity:
You can save money to donate certified charities under section 80G of income tax act. To avail this benefit you need to source a valid certificate from the charity organization.
19. Money Spent on Donation to Political Party:
There is no upper limit to tax deductions on money spent on giving a donation to a political party. Such deductions are a part of Section 80GGC. Such a donation amount equals to 100% deduction.
FAQs about Income tax saving tips:
How much amount deducted as Standard deduction for salaried person?
The amount of standard deduction is 50000/- from the financial year 2020-21.
Can I invest in mutual funds in order to save tax?
Yes, mutual funds can also be viewed as an income tax saving instrument. Make sure to verify whether the mutual funds are tax savers or not. Equity Linked Saving Schemes are beneficial when it comes to investing in mutual funds with the intention of saving tax.
Is wedding gifts taxable?
No, gifts received on wedding are fully non-taxable.
In Gratuity received is tax free?
Yes, the retiring or death gratuity is tax free up to Rs 20 lakhs.