Tax saving is crucial to anyone since tax laws regularly change in India. If you are an Indian taxpayer and need to save income tax, several methods can help you do this. Here’s the list of the top income tax saving tips in India to maximise your savings and reduce your tax liability this year.
Piramal Finance’s Tips to Save Income Tax in India
Regarding saving income tax in India, Piramal Finance offers several good options. Some of these tips include investing in NPS, locking in funds with monthly SIPs and getting tax benefits on education loans. Tax authorities consider home loan interest and HRA exemptions as good income tax saving options.
Invest in PPF
- PPF (Public Provident Fund) is India’s most popular income tax saving option. It is a long-term investment option and allows you to save up to 15 years. It also entitles you to earn a tax-free return on your investment.
- A deduction of 1.5 lakh can also be claimed under section 80C for the amount invested in PPF. Further, the maturity amount is also tax-free. It is a great way to save income tax while simultaneously creating wealth.
- The minimum amount you can deposit in PPF every year is Rs 500, and the maximum is Rs 1.5 lakh.
- The money deposited in PPF earns a fixed rate of 7.1% per annum and is compounded annually. The government of India decides the interest rate, which is revised every year.
Invest in ELSS Funds
- ELSS funds are one of India’s most efficient ways to save income tax. ELSS funds invest in a diversified portfolio of equity and equity-related instruments.
- They provide investors with good tax savings benefits. These funds are entitled to a tax deduction in Section 80C. They offer an effective way to save income tax up to ₹1.5 lakh in a financial year.
- Apart from providing a tax advantage, ELSS funds offer long-term capital appreciation opportunities as they are exposed to equity markets.
- They have a lock-in period of three years. It means that investors can benefit from both short- and long-term capital gains. Also, the risk associated with ELSS funds is low to medium since it is based on stock markets.
Get Health Insurance
- For Indian citizens, one of the most efficient ways to save on income tax is to get health insurance. Section 80D of the Income Tax Act in India permits individuals and HUFs to claim tax deductions for their health insurance premium payments.
- It is vital to note that only premiums paid toward health insurance policies are eligible for a tax break under Section 80D. Any premiums paid towards other insurance policies, such as life, motor, or travel insurance, cannot be claimed as a deduction.
- Having health insurance also helps to protect you and your family from urgent medical expenses. It can help to ensure that your finances are not adversely affected by an unforeseen medical need.
Invest in Sukanya Samriddhi Yojana
- Sukanya Samriddhi Yojana is a scheme designed by the Government of India. It encourages parents to save for their girl child’s education and marriage expenses. It offers high-interest rates, tax benefits, and flexible investment plans.
- This scheme is a great option to save income tax in India. Parents can open an account in the name of their girl child and deposit a minimum of Rs.250 every year up to a maximum of Rs.1.5 lakhs. The account matures after 21 years, and the withdrawals are tax-free.
- The amount sent into this account is fit for deduction under Section 80C for a maximum of Rs. 1.5 lakhs in a financial year. It reduces your taxable income and, thus, lowers your income tax liability. In addition, the interest earned from this account is also exempt from income tax.
Use NPS to save taxes
- The National Pension System (NPS) is an effective way to save taxes in India. NPS offers an attractive tax benefit under Section 80CCD(1).
- This tax-saving provision enables the taxpayers to claim a deduction of up to 10% of their total income or Rs. 1,50,000, whichever is lower. It makes NPS an attractive option for taxpayers looking to reduce their overall tax burden.
- NPS offers many investment options, allowing individuals to build a portfolio that suits their needs and risk profile.
- Investors can choose from asset classes, such as equity, fixed income, government bonds, and corporate debt. As per your risk appetite, you can create a balanced portfolio to maximize your returns and minimize your risk.
- Apart from the tax benefit, NPS offers other benefits as well. It allows you to withdraw up to 60% of your savings at retirement. Then you can use it for any purpose, including medical expenses and a house. The remaining 40% has to be invested in annuity products. This will provide you with regular income during retirement.
Saving income tax in India is a crucial task. Proper planning and the right steps can make it simpler and more effective. By taking benefit of tax deductions, exemptions, and credits, you can reduce the taxes you owe each year. Investing in a PPF or ELSS scheme is an equally good way to save on taxes. Additionally, keep track of your financial transactions, file your tax returns on time, and ensure you are up-to-date on the latest changes in income tax laws. For more information about how to save income tax in India, check Piramal Finance. They offer many articles and blogs that will help you learn newer finance skills to save on your taxes.