Best Ways to Save Big Amount of Income Tax in India

Best Ways to Save Big Amount of Income Tax in India— Saving income tax is a crucial aspect of financial planning for individuals and businesses in India. Effective tax planning not only helps in retaining a larger portion of your hard-earned money but also ensures compliance with legal requirements, thereby avoiding penalties and unnecessary stress. As the demand for smarter tax-saving strategies grows, it is essential to explore legitimate and efficient ways to optimize your tax outgo.

The need for effective tax-saving methods arises from the desire to achieve financial stability and maximize savings for future goals. From investments in tax-saving schemes to claiming eligible deductions, there are numerous ways to reduce your taxable income. In this blog, Praksha & Co. will guide you through the best ways to save big amount of income tax in India, offering expert insights and tailored solutions to help you make informed decisions.

Tax Saving Sections of the Income Act

The Income Tax Act, of 1961, provides various provisions and sections that allow taxpayers to reduce their taxable income through deductions, exemptions, and investments. These tax-saving sections are designed to encourage savings, investments, and spending in specific areas, such as healthcare, education, and retirement planning. 

Key Sections:

• Section 80C-It allows deductions up to 1.5 lakh in investments like PPF, EPF, NPS, National saving certificates, and equity-linked saving schemes.
• Section 80D-It allows tax deductions in medical insurance premiums.
• Section 80E-It claims tax deductions on educational loans.
• Section 80GG-It claims a tax deduction for house rent paid. 

Top 10 Best Ways to Save Big Amount of Income Tax in India

Income Taxpayers always look forward to saving income and fiscal liability. These are the best ways to offer multiple tax-saving investment options covered under different sections of the Income-tax regime under sections 80C,80GG, etc.

House Rent Allowance

House rent allowance is one of the tax-saving options enjoyed by employees. HRA is a part of the Section 10(13A)of the Income Tax Act 1961. You can utilize the benefits of HRA in case you are living in a rental accommodation, if you are residing in your house, HRA is fully taxable.

National Pension Scheme

A national pension scheme is a financial security initiative of the GOI. Investment in an NPS   scheme is a secure saving after retirement. If employees are investing in an NPS, they can enjoy a tax deduction in this way:

• Tax deduction of up to 10% of the salary under section 80CCD.
• Tax deduction of up to 14% of the salary for central government employees.
• For self-employed tax deduction up to 20% of the gross income under section 80CCD.

Health Insurance Premium

Health insurance is a Primary investment of every salaried employee, it ensures financial security in medical emergencies. Your health insurance is deductible under  Section  80D of the Income Tax Act 1961.

The tax deduction depends on the different age groups:

• A deduction of 25000 can be claimed for oneself, children, and spouse
• A deduction of 50000 can be claimed for persons above 60 years.

Travel Concession on Leave

Travel concession enjoyed by a salaried employee under the provisions of the Income Tax Act. Chapter 6 of the Income Tax Act provides travel concession on leave. The travel concession is available only for Domestic travelling. There is no concession for international travelling.

Tax-saving FDs

Tax saving FD comes under section 80C of the Income Tax Act 1961. Tax-saving FDs are the best and safest options for investors, Investors can claim a tax deduction of up to 1.5 lakhs by investing in these FDs. Saving FDs comes with 5 5-year lock period, you cannot withdraw before this limit. The interest rate for FD remains unchanged.

Retirement Benefits

A person above 60 can save in income tax by investing in a financial product like savings accounts, bank deposits, life insurance schemes, and post office deposits. They can claim Income tax deductions under section 80c of the Income Tax Act

Employee Provident Fund

EPF is a retirement savings scheme that offers several tax savings. It is one of the safe tax-saving options for salaried employees. An employee can claim a tax deduction up to 1.5 lakh in a financial year. However, it is important to know that if you withdraw EPF before 5 years, the amount you withdraw is taxable. The dual benefit of taxing and saving makes the EPF scheme a beneficial tool for employed personnel

Home loan

Under section 249b0 of the Income Tax Act 1961,  in the home loan, you can save up to 2 lakh on the interest amount. The deduction is for only those whose construction will be completed before 5 years. If the time of construction exceeds, you can claim only 30000.

Education Loan

Under the Income Tax Act 1961, you can claim a deduction on interest paid for educational loans,

Public Provident Fund

Following are the tax benefits you receive when you invest in PPF

• PPF is an investment under the   Exempt –Exempt-  Exempt category.  This means the deposit you make in the PPF account will be free from tax on withdrawal
• PPF account has a maximum deposit of 1.5 lakh per year, you can claim a deduction in the PPF account under section 80C of the Income Act.

Conclusion

Tax saving is crucial in India to minimize the financial burden and maximize economic gains. A conscious financial decision helps in securing a good financial future. By adopting these best ways to save big amount of Income Tax in India, you can effectively reduce tax-saving liability.