Under the Income Tax Act of 1961, there is a slew of legal ways to save money on taxes. Tax-advantaged mutual funds, NPS, insurance premiums, and medical insurance are just a few examples. We’ll go over all of the important tax deductions under the Income Tax Act in this article. The different points to keep in mind to save income tax are:
1. Use up your Rs 1.5 lakh Section 80C limit:
The investments/deductions listed below are all subject to a limit of Rs 1.5 lakh. To put it another way, they’re investments that need to cumulatively make and planned since making one will reduce room for the other:
- Tax Saver Fixed Deposits
- Public Provident Funds
- ELSS Funds
- National Saving Certificate (NSC)
- Life Insurance Premiums
- Home Loan Repayment
2) Pay into the National Pension System (NPS):
Only payments to the NPS qualify for the deduction under Section 80CCD(1B) of up to Rs 50,000. The NPS allows you to construct a retirement fund by investing in both equities and debt pension funds. At the age of 60, you can take it back.
3) Pay Your Health-Care Premiums:
Section 80D allows for a deduction of up to Rs 25,000 for health insurance premiums. This is in addition to the previously mentioned deductions. This limit has been raised to Rs 50,000 for senior citizens. A person who pays for his health insurance plus that of his elder parents can get a combined deduction of up to Rs 75,000 per year.
4) Take advantage of Rent deductions:
If you receive House Rent Allowance (HRA), you can claim a tax deduction. There is no top limit, but the maximum HRA deduction is capped by a series of rules. If you do not receive HRA but pay rent, you can deduct up to Rs 60,000 per year under Section 80GG.
5) Get a tax exemption on your home loan interest:
If you have a home loan, the interest you pay on it is tax-deductible up to Rs 2 lakh per year under Section 24 of the Income Tax Act. There is no upper limit for renting out your home. The total loss that can be claimed under the broader heading of income from housing property, however, is capped at Rs 2 lakh.
6) Put money aside in a savings account:
This is possibly the simplest deduction under the Income Tax Act. Section 80TTA exempts interest on savings accounts up to Rs 10,000 per year. Under Section 80TTB, the ceiling for combined FD and savings account interest for senior citizens is Rs 50,000.
7) Make a charitable donation:
You can deduct charitable contributions from your taxes. There is no upper limit, but different laws limit the number of charitable contributions that can be deducted from your taxes. The maximum for most donations to NGOs is 50 percent of the amount donated plus up to 10 percent of your adjusted total income. For you to be eligible to claim this deduction, NGOs under this section must hold an 80G certificate.
For more information about saving income tax, you may contact our experts who will guide you through the entire process.