How to save taxes legally?
At the end of each financial year, an assess finds himself with huge taxes on taxable income and make tax investments in a hurry. However, if an individual from the very beginning goes ahead with proper planning and knowledge he can feel relaxed at the end. The Income Tax Act, 1961 provides provisions for reducing tax liability.
The Indian government provides for various deductions:-
Under Section 80 C:-
- Life insurance premium
- Tuition fees up to maximum of two children
- Public provident fund
- National Saving Certificate
- Five years Fixed deposits with Banks and Post Office
- House Tax Loan – provides deduction for repayment of principal amount up to Rs. 100000/- and moreover, S. 24 allows to claim deduction of interest paid on home loan.
Under Section 80 D
- Medical insurance of own family and of parents
Under Section 80 G
- Deductions eligible for 50 % or 100 % exemption. An individual can make cash donation only up to Rs.10000/- for claiming deduction and cheque payment for more than Rs.10000/-
Under head Income from Other sources
- Bank Interest deduction up to Rs.10,000/-
- PPF Interest
Tax planning on Long Term Capital Gain– If an assessee holds any asset for more than 3 years and on its sale, long term gain arises then he can exempt himself from paying tax on capital gain if he invests the same on some specified instruments.
Related Post: Income Declaration Scheme 2016
House Rent Allowance u/s 80GG- an individual can claim deduction for the rent paid fo his own residence. However, an individual shall not be in receipt of the HRA from his employer for same house.
Tax on Bonus- to prevent employer from deducting taxes, present tax investments before time.
For Salaried persons – Reconstruction of salary helps to greater extend like- Transport allowance, lunch allowance, medical allowance and others.
Relief u/s 89 of IT ACT, 1961– this rebate can be claimed when an employee receives salary in advance or receives salary of earlier year in the previous year relevant to assessment year or receives compensation under Voluntary Retirement Scheme and has not claimed deduction under S.10 (10C) of IT ACT.