8 Ways to Save Tax Legally
1. Invest your Taxable Income in Different Tools
There are various tools investing in which you can claim tax rebate. Under the Section 80C deductions of the Income Tax Act (ITA) of India, you can claim a deduction of up to Rs. 1.5 lakh from investment in various tools listed in the act.
The list of investment tools which save tax for you include:
Employee Provident Fund (EPF),
Public Provident Fund (PPF),
Equity Linked Saving Scheme (ELSS),
Sukanya Samriddhi Account,
Tax Saving Fixed Deposit,
National Saving Certificate (NSC), and
Senior Citizen Saving Scheme
2. Make Charity Donations
Government encourages you to make donations and help the poor & needy. Donations to the PM relief fund or notified NGOs or to political parties can give you 100% tax deductions under the Section 80G of the ITA. In the recent amendment of the act, donations to government funds for Swachh Bharat Kosh, Clean Ganga Fund and the National Fund for Control of Drug Abuse are also included in the list.
3. Plan for a Home Loan
Home loan principal repayment and interest payment can be a massive tax saver for you. For an ongoing home loan, you can claim deduction on the repayment of the principal amount under Section 80C. The payment of the home loan interest can also allow you a deductible amount of up to Rs. 2 lakh. However, in order to avail the full benefit, the home loan has to be big.
4. Save Tax through Education Loan
Complete tax exemption is available on the repayment of the interest of an education loan. There is no limit to the deductible amount. However, unlike home loans, exemption is not available on the repayment of the principal amount. Try to consult someone with an experience in investment banking to avail maximum tax saving benefits from loans.
5. Account for Personal Expenses that save Tax
You are also eligible for tax deductions on some personal expenses including
6. Plan for Long Term Capital Gains
If you sell a long term asset possessed by you, you can be exempted from the Capital Gain Tax if the profit amount is re-invested in specified instruments. The asset has to be held by you for over 3 years for it to be counted as a long term asset. Long term gains from equity shares and mutual funds are also tax exempt provided these shares and funds were held by you for at least a year.
7. Get your Salary Restructured
Various expenses that you make for the job are tax deductible. You can ask your employer to restructure your salary and accommodate allowances which save tax for you. Such allowances include:
However, all the perks and allowances are not applicable for everyone; they are given only on the basis of your rank. And there is a specified limit on tax deduction on these allowances.
8. Plan a Leave Travel
If you are given a leave travel allowance from your employer, you can claim tax deductions on the same. However, such claims can be made only twice in four years. Also, the travel has to be within India and the maximum claim can be of AC Tier 1 train journey or economy class air travel.
Now that you know all the ways that can help you save tax, it is important to consider all these factors while planning for tax benefits.
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