How Can I Pay Less Income Tax?

Last Updated at: April 07, 2020
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How can I pay less income tax_

Every one of us is looking for options to save some extra money and saving on taxes is one way to do it. There are multiple ways to pay less income tax in our daily life. The Indian Income Tax Department allows taxpayers to save on their taxes through different media. However, to save on taxes, you need to start your tax planning in advance. The best option to pay less income tax and plan your tax-saving investments is at the beginning of the financial year. Most of the taxpayer’s delay until the last quarter of the year. Instead, if you plan at the beginning of the year, your investment can compound and help you achieve long-term goals. 

In how many ways we can save income tax in India?

  1. Interest income on saving and NRE account
  2. Claim amount collected on life insurance
  3. Educational scholarship
  4. Profit from selling shares or property mutual funds
  5. Earnings received on shares or mutual funds
  6. Amount received as gifts on marriage
  7. Agriculture income
  8. HUF account for secondary income
  9. Inherited amount through will
  10. Well known tax saving benefits under section 80C
  11. Tax savings on additional contribution to NPS
  12. Money received from provident funds
  13. Tax saving from home loan
  14. Tax saving on educational loan
  15. Medical insurance and treatment of a disabled dependant relative
  16. Medical treatment of detailed disease for self or dependent relative
  17. Donations

Tax saving tips for a business person in India

  1. Distributed profit to partners in partnership firms
  2. Travel or hostel expenses in business
  3. Food expenses in business

Tax saving process for salaried persons

  1. Leave travel allowance
  2. House rent allowance (part of salary)
  3. House rent allowance (not part of salary)
  4. Income from gratuity
  5. Meal coupons
  6. Standard deduction
  7. Company leased car
  8. Telephone or internet expenses
  9. Money under voluntarily retirement scheme- up to 5 lakh

How to save tax under Sec 80C & 80D?

  • Invest of Rs 1.5 lakh under section 80C to reduce your taxable income
  • Buy medical insurance and claim a deduction up to Rs. 25,000 (Rs 50,0000 for senior citizens) for medical insurance premium under Section 80D.
  • Claim reduction up to Rs 50,000 on Home Loan Interest under Section 80EE.

File your income tax now

Investment options under Sec 80C

The most common tax-saving benefits available to individuals and HUFs in India are under Section 80C of the Income Tax Act. Section 80C holds several investments and expenses you can claim deductions on up to the limit of Rs 1.5 lakh in a financial year.

For more tax-saving investments and expenses, have a note on the following Section 80C:

Investment 

Returns (%)

Lock-in Period (Years)

5-year bank fixed deposit 6 to 7 5
Public Provident Fund (PPF) 7 to 8 15
National Savings Certificate 7 to 8 5
National Pension System (NPS) 12 to 14 Till Retirement
Equity Linked Savings Scheme funds 15 to 18

 

Best Tax Saving Investment decision under Sec 80C

To pay less income tax, investment in ELSS Fund or Tax Saving Mutual Fund is considered as the best saving option. These funds are specially designed to give you the dual benefit of saving taxes and getting higher returns on investment.

 

  • Invest in ELSS (Equity Linked Savings Scheme) and save up to Rs 46,800 in taxes.
  • Lowest locking period of 3 years.
  • Delivered higher returns than FD, PPF or NPS.
  • Interest earned is partially taxable.

Here are some section-wise investment limit form the income tax:

Section 

Investment Limit

Type of investment avenues

80C
Maximum of Rs 1.5 lakh (aggregate of 80C, 80CCC & 80CCD(1)) PPF, EPF, bank FD’s, Insurance Premium, Tuition Fees, etc.
80CCD(1B)
Maximum Rs 50,000 for investment in NPS Pension fund
80CCD(2) Maximum 10% of basic salary including dearness allowance NPS contribution by the employer
80D For single taxpayers- Premium up to Rs 25,000 for senior citizens Rs 50,000 Medical insurance premium and preventive health check-up
80DDB
If dependant below 60 years- deduction is Rs 40,000

For senior citizens, the maximum deduction is Rs 1 lakh

Expenditure on the specified disease on dependant
80E 
No limit specified, maximum up to 8 years from the year of payment Interest on repayment of education loan
80EE
Maximum Rs 50,000 subject to certain conditions Interest on loan payable for obtaining a residential house property
80G
Differs with the amount of donation As mentioned under the Income Tax Act
80GG Rs 5000 per month or 25% of total income that is less Rent paid if HRS is not received
80TTA Up to Rs 10,000 per year for people below 60 years Interest on savings account bank and post office
80TTB
Up to Rs 50,000 per year for senior citizens Interest on all type of deposits held with a bank, post office

 

You can save money and lead a happy life. It is important to note not all tax savers are the same in terms of asset-class, so one should choose to use the instrument that best suits their individual needs. 

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How Can I Pay Less Income Tax?

458

Every one of us is looking for options to save some extra money and saving on taxes is one way to do it. There are multiple ways to pay less income tax in our daily life. The Indian Income Tax Department allows taxpayers to save on their taxes through different media. However, to save on taxes, you need to start your tax planning in advance. The best option to pay less income tax and plan your tax-saving investments is at the beginning of the financial year. Most of the taxpayer’s delay until the last quarter of the year. Instead, if you plan at the beginning of the year, your investment can compound and help you achieve long-term goals. 

In how many ways we can save income tax in India?

  1. Interest income on saving and NRE account
  2. Claim amount collected on life insurance
  3. Educational scholarship
  4. Profit from selling shares or property mutual funds
  5. Earnings received on shares or mutual funds
  6. Amount received as gifts on marriage
  7. Agriculture income
  8. HUF account for secondary income
  9. Inherited amount through will
  10. Well known tax saving benefits under section 80C
  11. Tax savings on additional contribution to NPS
  12. Money received from provident funds
  13. Tax saving from home loan
  14. Tax saving on educational loan
  15. Medical insurance and treatment of a disabled dependant relative
  16. Medical treatment of detailed disease for self or dependent relative
  17. Donations

Tax saving tips for a business person in India

  1. Distributed profit to partners in partnership firms
  2. Travel or hostel expenses in business
  3. Food expenses in business

Tax saving process for salaried persons

  1. Leave travel allowance
  2. House rent allowance (part of salary)
  3. House rent allowance (not part of salary)
  4. Income from gratuity
  5. Meal coupons
  6. Standard deduction
  7. Company leased car
  8. Telephone or internet expenses
  9. Money under voluntarily retirement scheme- up to 5 lakh

How to save tax under Sec 80C & 80D?

  • Invest of Rs 1.5 lakh under section 80C to reduce your taxable income
  • Buy medical insurance and claim a deduction up to Rs. 25,000 (Rs 50,0000 for senior citizens) for medical insurance premium under Section 80D.
  • Claim reduction up to Rs 50,000 on Home Loan Interest under Section 80EE.

File your income tax now

Investment options under Sec 80C

The most common tax-saving benefits available to individuals and HUFs in India are under Section 80C of the Income Tax Act. Section 80C holds several investments and expenses you can claim deductions on up to the limit of Rs 1.5 lakh in a financial year.

For more tax-saving investments and expenses, have a note on the following Section 80C:

Investment 

Returns (%)

Lock-in Period (Years)

5-year bank fixed deposit 6 to 7 5
Public Provident Fund (PPF) 7 to 8 15
National Savings Certificate 7 to 8 5
National Pension System (NPS) 12 to 14 Till Retirement
Equity Linked Savings Scheme funds 15 to 18

 

Best Tax Saving Investment decision under Sec 80C

To pay less income tax, investment in ELSS Fund or Tax Saving Mutual Fund is considered as the best saving option. These funds are specially designed to give you the dual benefit of saving taxes and getting higher returns on investment.

 

  • Invest in ELSS (Equity Linked Savings Scheme) and save up to Rs 46,800 in taxes.
  • Lowest locking period of 3 years.
  • Delivered higher returns than FD, PPF or NPS.
  • Interest earned is partially taxable.

Here are some section-wise investment limit form the income tax:

Section 

Investment Limit

Type of investment avenues

80C
Maximum of Rs 1.5 lakh (aggregate of 80C, 80CCC & 80CCD(1)) PPF, EPF, bank FD’s, Insurance Premium, Tuition Fees, etc.
80CCD(1B)
Maximum Rs 50,000 for investment in NPS Pension fund
80CCD(2) Maximum 10% of basic salary including dearness allowance NPS contribution by the employer
80D For single taxpayers- Premium up to Rs 25,000 for senior citizens Rs 50,000 Medical insurance premium and preventive health check-up
80DDB
If dependant below 60 years- deduction is Rs 40,000

For senior citizens, the maximum deduction is Rs 1 lakh

Expenditure on the specified disease on dependant
80E 
No limit specified, maximum up to 8 years from the year of payment Interest on repayment of education loan
80EE
Maximum Rs 50,000 subject to certain conditions Interest on loan payable for obtaining a residential house property
80G
Differs with the amount of donation As mentioned under the Income Tax Act
80GG Rs 5000 per month or 25% of total income that is less Rent paid if HRS is not received
80TTA Up to Rs 10,000 per year for people below 60 years Interest on savings account bank and post office
80TTB
Up to Rs 50,000 per year for senior citizens Interest on all type of deposits held with a bank, post office

 

You can save money and lead a happy life. It is important to note not all tax savers are the same in terms of asset-class, so one should choose to use the instrument that best suits their individual needs. 

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