By Kohal Dev Sharma, Advocate, Punjab and Haryana High Court
Everyone simply dreads the thought of paying tax every year. Paying tax isn’t a bad thing but paying too much tax is. This is why the government has laid down provisions for taxpayers to save taxes by making simple investments. So, if you feel like you are paying too much tax or have been wondering how you can save paying additional taxes from your income then you need to know of all the ways that can be worked out in your favour.
In case you have not been doing the tax planning properly, it is quite likely that you have been paying higher taxes than you should be. The laws concerning income tax appear so technical and scary that most people just avoid dealing with them. This is why most of the people lose out on a large chunk of their income by way of taxes that are deducted from their salaries by their employers. This is why you need to know of all the ways that can help you save your hard earned money. Some of these ways are quite simple and can help you claim your tax benefits with ease. With the littlest effort a lot can be done and you will save more money than you could have ever imagined. All of these ways are completely legal and there is nothing to be worried about.
Following are the top 12 ways that can help you save taxes legally:
- Repaying home loans. Home loans are a great way to not only help you get your dream home but also help you save tax. As per Section 80C and Section 80EE, one can claim tax benefits on payment of the interest as well as the principal part of a home loan.
- Repaying education loans. A lot of people go for education loans every year due to the ever rising costs of education. EMIs of an education loan bring in a lot of tax benefits that can be availed under Section 80E.
- Medical Expenses. Tax benefits can also be claimed for all the medical expenses of a person or their dependents. Special provisions have been laid down for providing tax benefits to those who spend on medical treatments of disabled dependents and also for specific diseases such as cancer or AIDS among others.
- If there is an Employee Provident Fund account that has been opened in your name by your employer then you can save on your taxes easily. Contributions made to EPF account can be claimed for tax benefits under Section 80C.
- Investing in a PPF is also a great idea to claim tax benefits. It is a great option especially if you are looking for a long term investment. Not only will you get tax benefits for your contributions, the interest that you earn from such investment is also exempt from tax.
- Sukanya Samriddhi Scheme. This is by far one of the best schemes floated by the Government of India in recent times. It is a great tax saving option that provides higher returns as compared to PPF and EPF. The only catch is that it is available to the parents or legal guardians of a girl child.
- Fixed deposit for five years in post office. A five year fixed deposit that can be opened in any post office throughout India is also a great idea to save tax. Contributions made to such a deposit are exempt from and also the interest that is earned thereafter.
- HRA deduction. This is a great option for salaried persons who are living in a rented accommodation. One can claim tax benefits by showing that they are paying rent.
- Making donations to a political party. This is also a new addition that benefits salaried individuals. All donations made to a political party are exempt from taxes and there is no limit to the same. However, there is a condition to the same that the donation should be made by any way apart from cash.
- Donations made to specified institutions. If you make donations to institutions such as those involved with scientific research etc. and have been recognised by the Government of India then you can claim tax benefits. Such donations are exempt from tax as well.
- Donations made to temples and charitable institutions. All donations made to temples or charitable institutions are exempt from tax and are a great way to save taxes. However, the same should not cross 10 per cent of the annual gross income.
- Investing in pension funds. Investing in pension funds that can help you secure your retirement are a great way to save taxes also. Pension funds are also exempted from taxes.
Make sure that all of the planning is done well in advance. Making investments when the deadline is near is definitely a bad way to lose out even more money. Choosing the right option well in advance will help you save money and help you make the right investment that suits you perfectly.
About the Author:
Kohal Dev, is a lawyer by profession and has a penchant for writing and his ability to juggle several tasks at a time, in the most effective and efficient manner is something that allows him to deliver content fresh out of the box. His extensive experience in the field of Law, Finance, Real Estate and Marketing allows him to write some of the most amazing blogs and articles in exactly the way they are required to be done. When not at work, he can be found reading and of course, writing.