Google search definitely sees a spike in one question at the end of every financial year in India – How to save income tax. As the financial year closes to an end, this question plagues every taxpayer and everyone scrambles to eke out what little they can to save from income tax.
There are many ways to save income tax in India – from Employee Provident fund to Health insurance plan, you can plough through different routes to save money in income tax. Read on to get a clearer idea on the very many ways you can save income tax.
- Public Provident Fund: PPF scheme is offered by almost all nationalised banks and post offices. It is a 15-year-old scheme where you can deposit for a maximum up to 12 times a year. The interest rate and the returns from the PPF account are non-taxable under section 80c. The current interest rate is 8% and is decided by the Finance Minister of India.
- House rent allowance: You can get tax exemptions from your house rent allowance if you submit the rent receipts and rental agreement. If you pay Rs.1,00,000 annually as rent then you must include the PAN id of your landlord. Even if you don’t get HRA but still pay rent, you can still claim for deductions under section 80GG.
- Open a savings account: Under section 80TTA interest on savings account are tax free. It is tax free up to Rs.10,000 per year for individuals and Rs.50,000 for senior citizens, i.e. if you accumulated interest amount of 15,000 from all your savings accounts, then you will have to pay taxes only for the amount Rs.5000.
- Health insurance policy: Buying a health insurance plan has the double benefit of not only covering for your health-related ailments but also of the perk of saving taxes on it. If you have opted for any of the individual health insurance plans, the premium paid towards it is qualified for tax exemption. This applies for the premium paid by individuals for themselves, spouse, parents and children. The maximum deduction you can claim in this category is Rs.25,000. If you are paying the premium for your parent who is a senior citizen, then the maximum cap is Rs.50,000.
- Educational loans: As per the Section 80E of the Income-tax Act, you can get a deduction on the interest paid for your education loan. The person who took the loan or his spouse is eligible for this exemption. It can be availed for a maximum of up to 8 years. You can submit the certificate of interest from your loaner to your employer to avail this benefit.
- Home loan deduction: The interest payable on the home loan is tax deductible. The maximum cap on it is 2 lakhs per annum. The exemption is applicable for all loans taken for house construction, repair, renewal or reconstruction.
- Voluntary donations: Donations made to charities or for philanthropic purposes, including National Relief funds, are exempted from tax deductions. It must be noted that you can only claim the exemption for donation made to organisations mentioned by the Ministry of Finance and those done by cash or cheque. You can get from 50% up to 100% tax deduction.