Looking for legal ways to save on the income taxes you pay? Check out this guide that lists the top 5 ways to cut down on taxes and reduce your financial burden.
As the fiscal year 2017-18 draws to a close, most of you would be concerned about the income taxes you’ll have to pay for this year. The big question running in everyone’s mind is, “Is there any way to reduce my income tax?”
Yes, you’re in luck. Fortunately, there’s still time, and here are a few top tips to help you reduce your tax burdens and make the most of your savings for the FY 2017-18.
- Take Full Advantage of Section 80C, Section 80CCC and Section 80CCD
Section 80C of the ITA is one of the biggest ways to cut down on income tax in India. By investing in any of the instruments specified by the government under these sections, you can claim tax deductions up to Rs. 1, 50,000.
Some of the popular tax-saving investment options in these categories include:
- PPF Accounts
- Pension Plans
- 5-year Tax Saving Fixed Deposits
- Equity Oriented Mutual Funds
- LIC Policies
- Contribution to EPF, NPS, and NSC
However, make sure that you don’t invest the entire 1, 50,000 in one investment plan. Spread it across different options and choose investments that fit your risk profile and financial goals.
- Claim Deductions on Home Loan Repayments
If you have availed a home loan, then you can claim a tax deduction on the principal amount you repay. Additionally, under Section 24, you can also avail tax benefits for the interest you repay on your home loan. The upper limit for this deduction is 2, 00,000INR, whereas there is no upper limit in other cases.
In fact, home loans are one of the best ways to save tax, as taxpayers can claim deductions under three different sections of the ITA, thereby enjoying huge savings.
- Insure your Health
Under Section 80D, of the ITA, you can claim tax deductions on the medical insurance expenditures. This includes the premium you pay to insure yourself as well as that of your family members.
The various subsections under medical insurance include:
- Section 80D – Deduction on medical insurance for self/spouse/children
- Section 80DD – Deduction on the treatment expenses for disabled dependents
- Section 80DDB – Deduction on the treatment expenses for specified diseases
- Deductions on Tuitions and Educational Fees
If you have children who are currently pursuing an education, then you can claim a deduction for the amount you pay as tuition fees. This deduction is available under Section 10(14) and 80C. Under Section 10(14), you can claim a deduction for an allowance of 100INR per month, for two children, while the maximum limit under 80C is 1lakh.
Additionally, if you’re repaying an education loan for a child, then you can claim a deduction on the interest repaid under Section 80E. There is no upper limit on this deduction.
- Profits or Dividends earned from Shares and Equity Mutual Funds
When you sell your shares or equity-based mutual funds, after 1year of holding it, then the profits you make from such sales are 100% tax-free. Similarly, the dividends you receive from stocks and mutual fund investments are tax-free.
Apart from these top 5 ways, there are plenty of other ways like salary restructuring, donations, rents and much more, to save on your income taxes. All that you need to do is be aware of the options available and make the right investment choices, and with some structured financial planning, you can save big on taxes.