Tax Hacks! Maximise Your Savings
If the great Albert Einstein found it challenging to understand taxes, what are the chances of us commoners understanding it completely?
The only things certain in life are death and taxes, Ben Franklin. Do you want to delay the former? Take better care of yourself. And some creativity can help you save maximum on the latter.
Taxes are inevitable in our lives, and we all try to minimise our tax liability. However, with so many rules and regulations, it can be overwhelming to navigate the tax system.
Some number crunching
In 2020, out of 130 crore Indians, only 1.5 crore Indians paid income tax. This implies that millions evaded taxes, while only 1% paid taxes.
A report from 2020 stated that India lost over ₹75,000 crores due to tax abuse from MNCs and evasions by private individuals.
Let’s look at ways you can not contribute to the above numbers and save maximum taxes.
Disclaimer: This blog talks about ways to maximise your tax savings. In no way does it teach us to evade taxes.
1. Invest in tax-saving instruments
The government provides several tax-saving instruments, such as the Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS), and others that can help you save taxes.
These investments don’t just help you save taxes; they’re also a good investment for retirement or achieving your goals. You can claim a deduction of up to INR 1.5 lakh under section 80C of the Income Tax Act by investing in these instruments.
2. Claim deduction on education loan interest
Suppose you have taken an education loan for yourself, your spouse, or your dependent children. In that case, you can claim a deduction on the interest paid on a loan under section 80E of the Income Tax Act.
Education loan interest deduction is available for a maximum of 8 years or until the interest is paid, whichever is earlier.
Did you recently get a raise and wondering where you can put all the money? Here’s what you can do with the extra dough.
3. Claim deduction on home loan interest
If you have taken a home loan, you can claim a deduction on the interest paid on loan under section 24 of the Income Tax Act. You can claim a deduction of up to ₹2 lakhs for a self-occupied property, and there is no limit on the deduction for a let-out property.
4. Utilise the leave travel allowance
You can claim tax exemption on the amount received as leave travel allowance (LTA) from your employer. Under this, you can claim all the expenses incurred on travel within India for yourself and your family members.
However, you need to remember that you can’t claim this for all the trips you and your family embark on. The exemption is available for a maximum of two journeys in four years.
5. Contribute more to the National Pension Scheme
Under section 80CCD of the Income Tax Act, you can claim a deduction on the contribution to the National Pension Scheme (NPS). The deduction is available for employee and employer contributions, subject to a maximum of 10% of your salary.
You can claim an additional deduction of up to INR 50,000 under section 80CCD(1B) of the Income Tax Act for your contribution.
6. Claim deduction on donations
If you have donated to charitable organisations, you can claim a deduction under section 80G of the Income Tax Act. The deduction is available for donations made to specified funds and institutions.
7. Select your tax regime carefully
Don’t have any of these tax investments and think investing in all these avenues at the last minute is silly? Then, you can opt for the new tax regime that inherently gives you tax savings.
Even if you have investments in any of the above avenues, you should check how much tax you will save in either of the tax regimes and then choose wisely.
These tax hacks can help you maximise your savings in India. However, it is essential to note that tax planning should not be the only criterion for making financial decisions. It is always advisable to consult a financial planner before making investment decisions.
Without considering the financial advisor, you can save a ton of money. Wanna know how? Simply subscribe to Kenko Individual Plan and get discounts on medicines, lab tests, doctor consults, daily healthcare and much more.