In India, the individuals are liable to pay income tax if their income is above 2.5 lakhs. Income tax is payable according to slab rates on an individual varying with their income level. Regular payment of income tax reduces the burden on an individual. People who pay income tax at the end of the financial year face a lot of challenges. If you want to save tax and protect yourself from financial stress, it is necessary to look at the following tips for tax-saving.
1. Provident fund:
The amount of interest on provident funds is tax-free. It takes time of five years before you withdraw the money from provident funds. Before five years, you cannot withdraw any amount from your provident fund. Provident funds help or save us from paying any amount of tax.
2. Equity Linked Saving Schemes (ELSS)
ELSS is an equity-oriented investment option mainly focused on equity funds and other equity-related instruments. It has a lock-in period of 3 years. Any investment made in ELSS funds is eligible for deduction in 80C.
3. Insurance policy:
Money received from a life insurance policy at the time of maturity or receiving the claim amount. The amount of premium is deductible from the taxable income. For insurance policies issued before 1st April 2012, premium up to 20% of the amount insured is deductible & for insurance policies issued after 1st April 2012, premium up to 10% of sum-insured is deductible.
4. Education scholarship:
The amount of education scholarship is tax-free under section 10(16). The amount received either under private or public scholarships is tax-free. Scholarships help students a lot come from a middle-class family. Now they can get scholarships free from tax.
5. Agricultural income:
Any income earned from agricultural activities is exempt from tax. For example- revenue from land, amount through a farm field, the amount received from agriculture products, income from the sale of seeds, etc.
6. Inheritance amount:
The amount received in the form of a will or the inherited money is always tax-free in India. No tax will apply on such an amount. This type of amount can be useful for a person. He/She need not pay any amount of tax on such an amount.
7. Gifts received at the wedding:
In India, weddings are an auspicious occasion for an entire family. It’s even where couples receive a lot of gifts. Such gifts are not taxable. Gifts, cash, cheque, stuff received at a wedding is tax-free. Mostly gift from friends or relatives and are purely a gesture of good wishes and love. They are non-taxable under section 56(2).
8. Expenditure on the treatment of specific diseases:
Tax benefits apply to expenses for treating specific diseases like cancer, Aids, etc. For these kinds of the disease, tax deductions up to Rs 40000 are applicable. For a senior citizen, the amount increases up to Rs 1 lakhs, any incurred expenses in this behalf are exempt from tax in India.
9. Education loan:
Education is the most important key factor in the development of every country. Every person or every family gives more emphasis on good higher education. Pursuing higher education is very expensive & not everyone can readily afford it. Often, individuals need to take an education loan to pay the fees. Education loans help them to pay the amount of the price of that particular institute. Under section 80E of the income tax Act, the interest paid for an education loan is non-taxable.
10. Donation to charity:
Tax can save by donating the money to charities. Money spent on donations or charity is tax-free under section 80G. If you have a valid certification from a charity organization, you will avail the benefits. Donations to charity can also help a person from paying any amount of tax.
To know how you can save your tax, you have to understand your pattern of income. If you want to save money from paying the income tax, invest your money in financial markets or instruments. Following up on the tips mentioned above will help you to a great extent. You should have a clear-cut objective and link the tax instruments to the desired goals. Apart from the mentioned points, there are other ways more that can help you to save on tax, but these were the best ways to save tax, adopt these ways and be free from the income tax.
