The use of legal methods to reduce the amount of income tax owed by an individual or a business is known as tax planning. This is typically accomplished by claiming as many allowable deductions and credits as possible. Everyone wants to save tax on their income and they save too. The only difference is that some people do this work legally, while some do it illegally. So, here we are telling you some easy ways to save tax legally.
1. SPEND ON RESPONSIBILITIES THAT CAN SAVE TAX: – Your financial responsibilities may provide tax benefits for you. This mostly applies to loans, as many of these offer tax benefits. For example, if you are planning to buy a house, you can take a home loan to meet this need. Thus, if you start your repayment before the end of the financial year, you will be able to claim tax exemption based on your repayment.
2. SAVE TAX BY DONATING: – You can donate a part of your income to organization acknowledged by the Income Tax Act. These could be charitable organizations or a relief fund, such as those started by the government early last year to help victims of natural calamities like the Kerala floods.
3. INSURE, SAVE TAX: – You can also save tax by getting health insurance. You can get tax exemption of up to Rs 25,000 under section 80D of the Income Tax Act on the annual health insurance premium you are paying.
- EDUCATION LOAN:- According to Section 80E of the Income Tax Act, the amount you spend in repaying the interest of your education loan can eligible as a tax deduction from your income.
The loan should have been taken for the education of self, spouse, children or a student for whom you are the legal guardian and should have been taken from a bank or an approved financial institution.
- BY INVESTMENT: – India government offers a provision to invest Rs. 1, 50,000 as per section 80C of the Income Tax Act. Therefore, by investing in tax-saving options under 80C, you can saving money on income-tax and also secure your future. Some of the popular investment options to save tax under section 80C are given below:
- Public Provident Fund
- National Pension Scheme
- Premium Paid for Life Insurance policy
- National Savings Certificate
- Fixed deposit for a duration of five years
- Sukanya Samriddhi account