How to reduce Taxable Income? – Tax Saving Options in India

How to reduce Taxable Income? - Tax Saving Options in India

Financial planning is the most effective way to save Tax. In the beginning of each financial year plan your tax saving. Collect the information on which head of expenses you can save tax. Know your income tax slab. Tax slab depends upon your total annual income, age & gender. If you found your income is eligible for Tax, plan to reduce your taxable income by showing other heads of tax free investments. According to Section 80C there are several Financial plans using which you can reduce Taxable Income. In this session let us discuss various Tax Saving Options in India.

Section 80C

Under Section 80C all the health insurance products are eligible for tax saving. Purchase Life Insurance products for you & your family. Pay regular Premiums & submit those receipts to reduce Taxable Income.

Review your Payslip

If you are a salaried employee check whether your employer provides PF (Provident Fund) or not. In-case of your employer has this facility. Create your PF account with your employer. Your contribution to Employee Provident Fund (EPF) can save up to Rs 1 lakh tax amount under the Section 80C. Check your salary slip. Know the factors how your salary is divided. If you are with your own house tell your HR to restructure your payslip. Reduce HRA & increase Basic. This will give you other benefits associated to higher basic pay. If you are with a rented house & paying more then your HRA. Talk to your HR & request them to increase your HRA with less Basic. The maximum of HRA is 50% of your Basic. Apply for food coupons instead of lunch allowances. Include medical allowance, transport allowance, education allowance & telephone expenses as part of salary. In the end of financial year submit these proofs of actual investments to reduce Taxable Income.

National Savings Certificates (NSCs)

Purchasing National Savings Certificates (NSCs) & Fixed Deposits (FDs) helps great in Tax Saving. NSC bonds are available in Post Offices. From NSC you will get returns after the fixed duration of saving. Fixed Deposits also directly affects in Tax saving. While investing in FD plan for 5 years in Minimum.

Mutual Funds

Mutual Funds is an another financial trick to save Income Tax. Mutual funds are having lock-in period of 3 years. Once you invested in Mutual Funds you can’t get back your money before 3 yrs. Mutual Funds gives more return on investments but it has risk factors.

Ulips

Ulips investments are Tax free. This is a best Tax Saving Option. You can invest up-to 1 lakh in Ulips to reduce Taxable Income.

House Rent & Home Loan

By Showing House rent or Home loan you can save Tax. If you have a house loan discuss this with your employer. Restructure your payslip with 50% HRA.

Expense in Child Education

Expense in Child Education (Maximum 2 Children), Tuition Fee & Education Loan are tax free investments. For these investments collect receipts & submit them to reduce Taxable Income.

Medical bill Submission

Submitting medical bill helps to save income tax. Consult with your tax specialist to know more about this.

Tax Deduction

Refer to section 80U Individual suffering from physical disability can claim deduction in Income Tax. For minor disability you can claim up-to 50000 tax deduction. In case of severe it can be 1 lakhs.

Donation

Donation made to Charity under section 80G is a tax free scheme.