Tips to save income tax for salaried persons, Every year our employers or chartered accountants remind us that it is time to pay our taxes. We all confront this tax season and find ways to save by paying taxes.
Many of us regard taxes as a financial burden, which can lead to stress if we lack knowledge about tax planning. Many taxpayers struggle to fit their income tax saving tips into their financial puzzle.
Individuals are continually looking for methods to lower their income tax, and there are numerous options available. This post is for you if you want to learn more about tips to save income tax for a salaried person. Continue reading to learn more.
Income Tax Saving Tips for Salaried Persons
You may have several sources of income during your life, and your earnings in a given fiscal year are subject to taxation under the Income Tax Act of 1961. You must pay taxes to the government whether you are a salaried employee, an entrepreneur, or have a rental income, and should know the tips to save income tax for a salaried person.
As a salaried employee, you should grasp your tax slab and the meaning of your pay split components before planning your taxes. By doing this, you can find out how to save on taxes with income tax saving tips.
Sections 80C, 80CCC, and 80CCD allow professionals to get salaries to reduce taxes. Yet, there are also additional methods and tips for salaried persons to save income tax for claiming tax deductions while filing their tax returns.
Below are different tips to save income tax for a salaried person which you can save on your taxes.
1. Save Taxes Under Sections 80C, 80CCC, and Section 80CCD
If you invest your money in certain sectors, you can deduct specified amounts from your taxes. You can save up to 1.5 lakhs in taxes by using these income tax saving tips. These sections’ financial tools are as follows:
- Public Provident Fund (PPF) – PPF is a tax-free savings plan that most Indian banks and post offices offer. The PPF scheme has a maximum term of 15 years and an interest rate of 7.10% that fluctuates quarterly.
- Tax Saving Fixed Deposits (FD) – The tax saving FD has a 5-year term and allows for tax deductions of up to 1.5 lakhs. The interest rate is taxable and ranges from 7.00% to 8.00%.
- National Saving Certificate (NSC) – The NSC scheme has a 5-year term and offers a 6.80% interest rate.
- National Pension System (NPS) – Tax deductions of up to 1.5 lakhs are available under this scheme.
- Employee’s Provident Fund (EPF) – If you contribute 12% of your salary to the EPF system, it counts towards the 1.5 lakhs maximum under section 80C.
- Senior Citizen Saving Scheme (SCSS) – The senior citizen saving scheme is available to persons over the age of 60 and has a 5-year term with a 7.60% interest rate. The contribution under this scheme counts towards the 1.5 lakh maximum.
- LIC premiums – Tax deductions of up to 1.5 lakhs are available for insurance policies and term insurances that cover 10 times the annual payment.
- Sukanya Samriddhi Yojana – If you are the parent of a girl child under the age of ten, you can apply for this plan. The term of this scheme is 21 years or till the girls marry after 18 years. The taxable interest rate in this scheme is 7.60%.
2. Other Schems Under Sections 80C, 80CCC, and Section 80CCD
- Equity-Linked Saving Scheme (ELSS) – This program is a mutual fund investment with a minimum of 80% of the asset, a three-year lock-in period, and a 10% long-term capital gain tax.
- Repayment of the home loan – The principal repayment of a home loan gives tax deductions of up to 1.5 lakhs each year.
- Tuition fees – By paying your children’s tuition costs, you can claim a tax deduction of up to 1.5 lakhs.
3. Claim a Tax Deduction Against Medical Expenses
Section 80D allows an employee getting a salary to claim a tax deduction for medical insurance using the Tips to save income tax for a salaried person. They can claim their payment of Rs. 25,000 against medical insurance to cover their spouse or children and another 25,000 for their parents. As a result, each individual can claim up to Rs. 50,000 in medical expenses.
4. Claim a Tax Deduction on the Interest Payable on the Home Loan
Section 24 allows you to save income tax of up to 2 lakhs for interest on a house loan in a fiscal year. Yet, a loan is required to acquire, build, repair, or renew the property. Also, you can claim a tax deduction for principal repayment under section 80C.
Read More: Education Loan Scheme By Narendra Modi
5. Save Tax by Opting for an Education Loan
You can also claim a tax deduction for student loan interest, and such interest are from your taxable income for the fiscal year. One can use Any financial institution to obtain an education loan. The loan, however, might be taken out for the individual taxpayer or any of his relatives over whom the individual is the guardian looking to save income tax.
The tax deduction is available beginning with the prior year in which you began paying interest on the loan. However, the maximum period for which you can claim the tax benefit is eight fiscal years or until the completion of payments. This Tips to save income tax for a salaried person most opt.
6. Save Income Tax by Investing in Shares and Mutual Funds
Individuals can save income tax under section 80CCG of the Income Tax Act by investing in stocks and mutual funds. Furthermore, persons earning less than 12 lakhs per year can get an extra tax benefit if they invest in shares and mutual funds of companies using these Tips to save income tax for a salaried person. These tax breaks are given solely to first-time investors under the Rajiv Gandhi Stock Savings Plan.
7. Through Long-term Capital Gains
Long-term capital gains can save you money on taxes if you receive the gain by selling a long-term capital asset and then investing it in particular instruments. A long-term capital asset is any asset that you have had for more than three years.
8. Save Money on Taxes Through Donations
Tax deductions are available for money spent on gifts or contributions to the National Relief Fund. It’s possible to claim Tax deductions for money spent on any form of charity or social purpose. You can deduct up to 50% of the donation amount to NGOs and 10% of your total income. But, to claim tax deductions under section 80G of the Income Tax Act, you must obtain an 80G certificate from the NGOs. You can also claim a tax deduction for donating money to political parties if certain conditions are met.
9. Claim a Tax Deduction on House Rent Allowances Under Section 80GG
Home rent allowances are deducted from employees’ earnings and help them save income tax by claiming them under section 80GG. But, if your total rent in a year exceeds Rs. 1 lakh, you must produce specific documentation in order to tax deduction. Furthermore, you cannot claim the entire HRA amount provided by the employer.
10. Leave Travel Allowance
Leave Travel Allowance is tax-free and can be claimed twice every four years under Income tax saving tips. To claim this amount, you must travel within India with your spouse, children, and parents during your leave term.
11. Wedding Gifts
Wedding gifts are excluded from taxation under the Income Tax Act, and you can receive up to Rs. 50,000 tax-free. Gifts in excess of this amount, however, will be subject to the corresponding tax slab. These are the best Income tax-saving tips.
12. Income from Agriculture
Agriculture income is not subject to income tax, however, there is an indirect taxing mechanism for such revenue. It partially blends agricultural and non-agricultural income and proposes to tax non-agricultural income at a higher rate.
13. Save Tax on Money Received From the Life Insurance Policy
In these Tips to save income tax for salaried persons, If the premium is less than 10% of the sum assured, the maturity amount of the life insurance policy is totally exempt from income tax under section 10. It does, however, require that the policy be issued after April 1, 2012.
These are some of the tips to save income tax for a salaried person, and if you carefully arrange your income, assets, expenses, and taxes, you might save a lot of money. You can drastically lower your tax burden by following the advice provided above.
Tips to Save Income Tax for Salaried Person – FAQs
Can I file my income tax return (ITR) online?
Ans. Yes, you can submit a properly completed income tax return (ITR) form by visiting the Income Tax Department of India’s official website.
Is a savings account interest-tax-free?
Ans. Interest paid on savings accounts is free from taxation under Section 80 TTA of the Income Tax Act if the total amount earned is less than Rs.10,000.
Are employer-provided allowances taxable?
Ans. Absolutely, the Income Tax Department considers employer-provided allowances to be a portion of salary and thus taxable. Some allowances provide tax benefits under certain parts of the Income Tax Act.
What is the biggest tax saving in India?
Ans. Individuals can claim a maximum tax savings of Rs 1.5 lakhs each fiscal year using deductions and tips to save income tax for a salaried person under Section 80C of the Income Tax Act. Further tax breaks are offered through several sections, such as Section 80D for health insurance and Section 80E for school loans, among others. The maximum tax savings are determined by the deductions and exemptions you claim.