Tax Planning: The 7 Best Ways To Legally Save Tax In India Indiafleurit

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Rohan: Why?

Shyam: Don’t you think that all the money you make from this sweat and toil goes to the government. Doesn’t the middle class pay the heavy taxes?

Rohan: Yes, I agree and there is no escape for paying taxes. You must comply with the laws of the country in which you live. But one thing you can do is think about legal tax saving plans for individuals.

Shyam: Is there something like this out there?

Rohan: Yes, of course. You need to check out different life insurance plans that magically help you in your tax planning strategies.

Shyam: Ah !! I never used my brain for this. Let me consult my financial advisor for legal tax saving plans.

If you are also worried and irritated by the large outflows of income in the name of taxes, you should immediately think of some strategic tax saving plans.

Contents

What are the legal tax saving plans?

Why do you have to pay taxes?

Tax Planning: The 7 Best Ways To Save Tax Legally In India.

Conclusion.

What are the legal tax saving plans?

Legal tax saving plans are ways in which you can manage your finances and save them for the future. You can save taxes legally with the help of life insurance plans, by investing in financial instruments exploited by the market such as mutual funds, SIPs, ELSS, etc.

You feel the need to save on taxes because as income increases, tax outflows also increase. In the end, it leaves you with the feeling that you are not in a position to save much for your family.

Doesn’t the idea of ​​saving annoy you to work harder towards disciplined tax savings?

If the answer is yes, here are some steps you can take to legally save taxes.

But before that, you should read and keep in mind that we are talking about legal actions you can take to save taxes. To move forward, let’s first read why do you have to pay taxes?

Why do you have to pay taxes?

The money you pay in taxes is used by the government for the development of facilities and infrastructure in the country. Roads, health facilities, and improved joint support and care are due to the fact that many like you pay taxes. Maintainers make sure all development is up to date so you can use it fully.

Now, that doesn’t mean that you are giving away all the money that you could have used to create financial assets for the family. Is not it ?

If this makes sense to you, the following is a must read for you.

What Are Some Ways You Can Save Taxes?

You can do either of these methods to legally save taxes in India:

  1. Claim expenses: Claim expenses to save income tax in India. For example: if you have purchased a health insurance policy, you can deduct the expense to save tax.

  2. Invest in tax saving instruments: Invest in tax saving instruments that are permitted for tax deductions under Section 80C of the Income Tax Act 1961.

Tax Planning: The 7 Best Ways To Save Tax Legally In India.

Here are some of the safe and legal ways to legally save tax in India.

  1. Tax planning thanks to mortgage:

If you have a home loan, you can claim a deduction for repayment of capital under section 80C.

In addition, you can deduct the interest paid on a home loan under section 24 of the tax code. In some circumstances the highest deduction allowed is Rs. 2,000,000, while in others there is no limit to the amount of interest paid on a home loan. In common, tax planning to save taxes by taking out a mortgage is strongly recommended because the deduction for mortgage repayment can be claimed in three distinct parts, resulting in significant tax savings for the taxpayer.

  1. Tax planning with deductions under Articles 80C, 80CCC and 80CCD:

In order to promote tax savings and induce savings in common man in a correct manner, Indian government allows taxation under Section 80C, Section 80CCC and Section 80CCD.

The maximum cumulative deduction under these three section categories is Rs. 150,000. You can claim these deductions to avoid tax if you have done adequate tax planning throughout the year by investing in one. of these sections alone or in combination, but the total deduction allowed is only Rs. 150,000. Some of the common instruments you can invest in to save tax are:

An additional tax saving deduction for Rs.50,000 under section 80CCD was introduced by investing in the National Retirement System (NPS).

  1. Tax planning under section 80D:

One of the most traditional and common ways to legally save taxes in India is through the use of health insurance plans. Income tax deduction is allowed to save tax if the expense was paid for health care. The policy can cover you, your spouse, dependent children and dependent parents. The ceiling of the tax deduction for each case is specified.

  1. In case the medical insurance premium is paid by the individual for himself, his spouse, his dependent children – Rs. 25,000. If the insured person is an elderly person, the deduction allowed should be Rs. 30,000.

  2. If the individual pays the premium payment for medical insurance for parents, whether dependent or not – Rs. 25,000. In case the parents of individuals are elderly, the deduction allowed under of Section 80D is expected to be Rs. 30,000. The premise for the elderly has been increased from Rs. 30,000 to Rs. 50,000 from the 2018-19 fiscal year (announced in the 2018 budget).

The description Medical insurance premium paid for yourself, your spouse and your dependent children Medical insurance premium paid for parents Total deductions under section 80D
Nobody is 60 years old 25,000 rupees 25,000 rupees 50,000 rupees
Individuals and families are under 60, but parents are over 60. 25,000 rupees 50,000 rupees 75,000 rupees
Individual and parents are over 60 years old 50,000 rupees 50,000 rupees Rs. 1,00,000

This deduction of Rs. 5000 is not in addition to the aforementioned deductions of Rs. 25,000 / Rs. 50,000, but is instead included. Preventive health checks are a new deduction that has been granted under this clause. Under section 80D, a deduction of Rs 5,000 would be allowed for the payment of a preventive health check for the individual or members of his family, including parents and dependent children.

  1. Tax savings under section 80E for the student loan:

If a taxpayer takes out a student loan for himself, his spouse, his children or a student of whom he is the legal guardian, he can deduct it under section 80E and save money on taxes.

This deduction is only available for the repayment of interest on a student loan, not for the repayment of principal. There is no upper limit on the amount of interest that can be deducted under the section for the repayment of a student loan. Individual taxpayers, not HUFs, are eligible for the Section 80E deduction.

  1. Expenses incurred to care for a disabled dependent:

Section 80DD allows tax deductions on behalf of expenses incurred to treat the disabled person. Total expenses incurred for a person with a 40-80% disability qualify for a standard deduction of Rs. 75,000, while money spent for a person with a disability over 80% qualifies for a fixed deduction of Rs. 125000. These costs must be incurred for the treatment of an illness, rehabilitation or training. To take advantage of this deduction, you will need to provide a proof of disability.

  1. Cost incurred for the treatment of specific diseases:

Section 80DDB allows the deduction of costs incurred for the treatment of specific diseases. Expenses incurred to treat specific conditions such as dementia, cancer and HIV / AIDS are eligible for tax benefits. Tax deductions of up to Rs. 40,000 are available for such illnesses. The sum doubles to Rs. 1 lakh if ​​the expenses are for a dependent elderly citizen.

  1. Contingency fund amount:

Interest earned on the contingency fund is tax exempt. You must wait five years before withdrawing money from your Provident Fund.

Conclusion:

These are the common ways to legally save tax in India. You can choose any of the above methods according to your personal needs. Legal tax savings plans for individuals can help you divert your income to generate returns. Although paying tax is a duty, if you can save it effectively, you can also build wealth for yourself. For more information and details, you can consult your tax advisor.


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