Every taxpayers wants to minimize his Income Tax liability but they do not know how to reduce Income Tax liability legally. As a result of which, they pay more tax which they can save
HOW TO SAVE TAX
A. For Salaried and Retired Employee and other Individual & HUF
The most suffered tax payers are salaried persons. S alaried persons don’t have much scope for reducing their tax liability however a businessman can save tax through many unscrupulous ways.
However, still there are various ways to save tax for salaried person:
a) Savings under section 80 C & 80CCC ( Maximum investment limit Rs. 1.50 Lakh)
A salaried person can invest in the following schemes. The investment limit in this section is Rs 1.50 Lakh.
i) Compulsory contribution towards Provident Fund
ii) Voluntary Contribution towards Provident Fund
iii) Contribution in Public Provident Fund account
iv) Life Insurance Premium
v) Equity linked saving scheme,
vi) Principal amount payment of home loan
vii) Payment of Stamp duty and registration charges for purchase of property
viii) Deposit under Sukanya smriddhi yojana (SSY)
ix) National saving certificate (NSC)
x) Senior citizen savings scheme (SCSS)
xi) Unit Linked Insurance Plan (ULIP)
xii) Tax Saving FD for 5 years
xiii) Infrastructure bonds
xiv) Payment inannuity pension plans
xv) Tax savings Mutual Fund (ELSS)
b) Savings under Section 80 CCD( 1 )
Employee’s contribution towards NPS under section 80CCD (1)
However, maximum deduction allowed is least of the following
10% of salary (in case taxpayer is employee)
20& of gross total income (in case of self-employed)
Rs 1.5 Lakh (limit allowed u/s 80C)
c) Savings under Section 80CCD( 1 b)
Additional deduction of Rs. 50000 towards contribution against NPS. Contributions to Atal Pension Yojana is also eligible for deduction.
d) Savings under Section 80CCD( 2 )
Employer’s contribution towards NPS under section 80CCD (2) is allowed for deduction up to 10% of basic salary plus dearness allowance under this section.
e) Savings under Section 80D
Health Insurance Premium is allowable deduction under section 80D up to Rs. 25000 for self, spouse and dependent children. Additional Rs. 25000 may be available for deduction if premium is paid for parents under 60 years.
f) Savings under section 24
Interest on House Building Loan is deductible under Income from House Building up to Rs. 2 Lakh.
g) Deduction for Interest earned from Bank Accounts and Deposits under Section 80TTB
Senior citizen can avail a deduction under section 80TTB up to Rs. 50000 for Interest earned against Bank Deposits.
h) Deduction under Section 80G for Donation given to Charitable organisations.
One can save Tax by giving Donation to eligible Charitable organisation under section 80G. But before giving Donation, it must be ensured that the organisation is registered in Income Tax Department and is eligible for 80G Deduction.
i) Section 80DD – Disabled dependent deduction. (Spouse/Children/Parents)
If any Spouse/Children/Parents is disabled partially or totally, deduction can be claimed in this section.
j) Section 80U- Deduction for Disabled Tax Payer
If any Taxpayer himself is disabled partially or totally, deduction can be claimed in this section.
k) Deduction for Long Term Capital Gain
Long Term Capital Gain can be saved up to Rs 1 Lakh for Equity based Mutual Fund .
Long Term Capital Gain from sell of Property can also be saved if certain conditions are fulfilled viz. Investment in New Property, Purchase of Capital Gain Tax Bond etc.
B. For Businessman
In addition to above savings or deduction, a businessman can also save Tax in the following ways:
a) Hire your own family members and relatives and paid salary up to Rs. 250000 which is not taxable in his/her hand and you get allowable expenses.
b) Booking of Traveling and Accommodation in Firm’s Name as it is an allowable expenditure.
c) Invest more in Digital Marketing. It will increase your sale and also you can claim it as a deductible expense.
d) Business Utility.- Claim your vehicle running expenses, driver’s salary, mobile and telephone bills and other utility payments as allowable expenses.
f) Donation to Income Tax approved organisation
g) Housing Loan
h) Depreciation
i) Digital Transaction over Rs. 20000 is totally stopped. As these transactions will not be eligible for allowable expenses.