How to Save Taxes : Financial Strategies
Definition :
A tax is a must-pay fee or charge imposed by the government on an individual's income or a business's profit to collect gains for the expenditure of public programs and for the welfare of its people.
The tax is also added to the cost of some goods, and services and even on some transactions such as GST, IGST, CGST, SGST, and VAT.
An individual whose profitable net income per annum exceeds 2.5 lakhs is liable to pay tax.
The Income Tax Department, after many considerations, willfully encourages saving schemes and investment plans among the taxpayers, which paved the way for various tax deductions from the taxable income.
"The purpose of a tax cut is to leave more money where it belongs: in the hands of the working men and working women who earned it in the first place."
Let's examine the tax deductions in detail.
Sections eligible for Tax Deductions :
First, let us see all the available sections under which the tax payable amount can be reduced.
The sections include Sections 80C, 80CCC, 80CCD(1), 80CCE, 80CCD(1B), 80CCD(2), 80TTA, 80TTB, 80GG, 80E, 80EEA, 80D, 80DD, 80DDB, 80U, 80G, 80GGB, 80GGC and Section 80RRB.
80C | Equity Saving Schemes, PPF/SPF/RPF, Life Insurance Premiums, home loan, SSY, NSC, SCSS | Rs 1,50,000 |
80CCC | Pension schemes for senior citizens | Rs 1,50,000 |
80CCD(1) | Atal Pension Yojana or other pension schemes by government | 20% of total income |
80CCD(1B) | National Pension System | Rs 50,000 |
80CCD(2) | Employer’s contribution towards NPS | 10% of basic salary +DA |
Section 80C :
This section includes investments made in Equity Saving Schemes, PPF / SPF, RPF, payments for Life Insurance Premiums, home loans, SSY, NSC, SCSS, etc.
Under these mentioned categories a minimum deduction of Rs. 1.5 lakhs can be done.
Savings under Pension Plans :
A total of Rs.1.5 lakhs can be deducted from the payable tax amount for the investments made towards the pension schemes in the name of senior citizens. It comes under the Section 80CCC.
Interest Income on Savings Account :
The deduction of tax for interest income on savings accounts falls under Section 80TTA. If you have invested in any schemes in banks, post offices, etc., that produce interest as an income, then you can apply under this section.
However, only those who are under 60 years are applicable to this section.
The senior citizens can claim this deduction under Section 80TTB.
The maximum deduction for Section 80TTA is up to Rs. 10,000 and for Section 80TTB it is up to Rs. 50,000.
Section 80GG :
Do you pay your taxes living in a rental house?
You can save up to 25% of your total income by claiming the deduction.
For this, the taxpayer must be living in a rental house and paying rent by themselves. They should not receive a House Rental Allowance in their salary structure from their employer. And it is necessary that they should not have any residential property in any other place.
Deduction on Education Loan :
The deduction of interest on an education loan comes under Section 80E. This section can be claimed up to for about 8 years from the start of the interest amount paid.
The education loan taken for higher studies can be for the taxpayer, their spouse, or their children or even for a student for whom the taxpayer acts as a legal guardian.
Section 80EEA :
This section is for taxpayers who are first-time homeowners and are paying interest on a house loan.
The payor should not own any residential house on the day of loan sanction. The Stamp Duty Value of the house should be less than or equal to Rs. 45 lakhs. The payors who claim under this section are not eligible to claim under the Section 80EE.
Deduction on Medical Insurance Premium :
Policy Holders | Deduction for Payor and Family | Deduction for Parents | Additional deduction for health check up | Maximum Deductable Amount |
Self & Family (below 60 years) | 25,000 | - | 5,000 | 25,000 |
Self & Family + Parents (all of them below 60 years) | 25,000 | 25,000 | 5,000 | 50,000 |
Self & Family (below 60 years) + Parents (above 60 years) | 25,000 | 50,000 | 5,000 | 75,000 |
Self & Family + Parents (above 60 years) | 50,000 | 50,000 | 5,000 | 1,00,000 |
If you are paying medical insurance, then you are eligible to claim under this section in accordance with the below-mentioned information.
If the payor and his family are below 60 years, then the maximum deduction can be made up to Rs. 25,000.
If the payor, his family, and his parents are all below 60 years, then the deduction amount is up to Rs. 50,000.
If the payor and his family are below 60 years but his parents are above 60 years, the amount goes up to Rs. 75,000.
If the payor, his family, and his parents are above 60 years, then the deduction amount can be extended up to Rs. 1,00,000.
In addition to this, Rs. 5000 can be deducted separately which is allotted for the preventive health checkup, and this is common to all irrespective of age.
Section 80DD :
This section is for the dependent relative of the payor, who is disabled or handicapped.
If the dependent relative of the payor receives medical treatment, training, or rehabilitation, the payor is eligible under Section 80DD for the deduction of medical treatment for the dependent disabled person.
If the disability is normal, the deduction amount will be up to Rs. 75,000.
If the disability is severe, then the amount will be up to Rs. 1,25,000 lakhs.
To claim this deduction, a disability certificate is needed from any medical authority.
Donations for Communal Causes :
Section 80G covers the tax deduction benefits on account of donations given for communal causes.
Either the deduction can be up to 100% or 50% with or without restrictions.
Winding Up :
It is very important to pay taxes as a citizen, as taxes contribute 17.7% on the country's total GDP. This revenue helps the government to implement many public welfare matters of the State or Country.
"A person doesn't know how much he has to be thankful for until he has to pay taxes on it."
So, one must pay taxes regularly without failure despite focusing on how to save their income.
"Better Planning for Better Future."
