Ten strategies to lower your income tax

tax deduction

There are just a few months remaining in the Financial Year 2023–24 to save income tax. Offices are now requesting investment proofs from their staff members. There are numerous investment plans that can significantly reduce your income tax liability.

If you have invested to reduce your taxes, that’s great, but if not, you still have time.

There are several tax deductions that allow you to claim tax exemptions on investments, profits, and other sorts of payments, which can help you save money on taxes for the fiscal year.

1. Investment in LIC, PPF, and NSC

Section 80C is the simplest and greatest way to save income taxes. This area offers a wide variety of tax exemptions.

Under Section 80C, the principle of your home loan, children’s tuition expenses, Provident Fund (EPF), PPF, and National Savings Certificate (NSC) are all tax-exempt.

The amount that is excluded is Rs 1.5 lakh.

If you have bought an annuity plan (pension plan) from LIC or another insurance firm, you are eligible for tax exemption under Section 80CCC.

If you have contributed money to the Central Government’s pension plan, you may be eligible to receive it under Section 80 CCD (1). When combined, the tax exemption cannot be more than Rs 1.5 lakh.

tax deduction

2. Make an NPS investment

One can receive an extra exemption of Rs 50,000 under Section 80CCD (1B) if they invest in the Central Government’s New Pension System (NPS).

This exemption is not the same as the Rs 1.5 lakh tax relief that section 80C grants.

In the Central Government Pension Plan, employer contributions are also deductible under Section 80CCD2.

For this, there are two prerequisites.

First, find out if the employer is a state government, a Public Sector Unit (PSU), or another entity.

Ten percent of the pay is the maximum deduction allowed in this case.

The deduction cap is 14% if the Central Government is the employer.

3. Interest on home loans will reduce taxes

For loans for the combined education of two children, there is a tax exemption.

Two children’s loans of Rs 25 lakh each, each at a 10% interest rate, would require an annual interest payment of Rs 5 lakh on a total of Rs 50 lakh.

This entire sum will be excluded from taxes.

Interest on house loans is also excluded from taxes.

You may claim this exemption under Income Tax Section 24(b).

Under this, interest up to Rs 2 lakh is exempt from taxation.

This exemption from taxes will only be granted if the property is “self-occupied.”

4. Use home loan principle to reduce taxes

Section 80C allows you to receive a tax exemption on the principal of your home loan.

It is limited to Rs 1.5 lakh, though.

Thus, keep in mind that the maximum deduction you can claim in section 80C (all plans of the first point) is Rs 1.50 lakh.

5. Interest on college loans is free from taxes

The tax deduction for student loan interest is available indefinitely.

The year that the loan repayment begins is also the year that the tax claim begins.

The following seven years are covered by its benefits.

For a total of eight years, you are eligible for tax exemption.

 

6. Premium for health insurance

If you have health insurance, Section 80D allows you to claim premiums.

You are eligible to receive a premium reimbursement of up to Rs 25,000 if you have purchased health insurance for your parents, spouse, kids, and yourself.

In this instance, the parents’ ages ought to be under sixty.

The maximum amount of tax exemption that applies if your parents are senior citizens is Rs 50,000.

It also includes a Rs 5,000 health checkup.

The deduction, however, is limited to the cost of health insurance.

7. Costs of caring for dependents with disabilities

Claims are allowed for costs related to the care or maintenance of dependents with disabilities.

maximum of Rs 75,000 can be claimed annually.

tax deduction of Rs 1.25 lakh on medical expenses can be claimed if the dependant individual has a handicap of 80% or more.

8. Medical treatment payments are free from taxes

Income tax deductions of up to Rs 40,000 are available for the treatment of certain illnesses that oneself or any dependents may have under Section 80DD 1B.

The upper limit is Rs 1 lakh if the individual is a senior citizen.

9. Loan-based rebate for electric cars

If you have taken out a loan to purchase an electric car, you are eligible for an interest payment tax exemption of up to Rs 1.5 lakh under Section 80EEB of the Income Tax.

10. Rent for the house

You may use Section 80GG to claim house rent payments if HRA is not included in your pay. You are not eligible to claim housing rent under 80GG if your employer offers HRA.

Related Post

image

Understanding Taxation of Dividends from Shares and Mutual Funds

Understanding Taxation of Dividends from Shares and Mutual Funds As the deadline for filing income tax returns approaches, clarity on the taxation of dividends received from investments in shares and…
image

Understanding Capital Gains Tax on Equity and Mutual Funds

Understanding Capital Gains Tax on Equity and Mutual Funds Investing in equity and mutual funds can significantly enhance your wealth but also entails tax obligations on capital gains. Capital gains…
image

The Importance of Verifying Your Income Tax Return

The Importance of Verifying Your Income Tax Return Filing your Income Tax Return (ITR) is just the first step in the tax process. To ensure your return is valid, you…

Book A One To One Consultation Now
For FREE

How can we help? *