Income tax filings can not only be cumbersome but might seem dreadful if you are shelling out a considerable portion of your salary in terms of taxes. Fret not! There are several legal ways of saving money on taxes. As a salaried employee in India, you can save taxes under several sections of the Income Tax Act by claiming deductions at the time of filing tax returns. Our government encourages us to save taxes both by spending money and investing. Therefore, it is essential to discipline your tax filings to have more money in your hands to invest in obtaining surplus income. So, if you want to know how to save income tax on salary, then read on!
Sometimes group health insurance can also help in tax saving, Plum Insurance offers group medical insurance plans at affordable prices. Their insurance includes but is not limited to COVID-19 care, maternity and newborn care, dental care, routine health checkups, unlimited doctor consultations. Plum Insurance has a holistic approach towards medical insurance, and therefore, they also take care of your mental wellness. The entire process is made simple through digital claims.
Claim Rent Allowance If You Live On Rent
A salaried person can claim a tax deduction called HRA or House Rent Allowance if they live in a rented house under Section 10(13A). There are three components to HRA, and you can claim the least of the following-
- Amount received as HRA
- 40% of salary in non-metropolitan cities and 50% if you live in metro cities ( Delhi, Kolkata, Mumbai, or Chennai)
- Rent paid minus 10% of your salary
However, if the rent paid exceeds Rs. 1,00,000, then you will have to provide the PAN of the landowner.
A home loan is a blessing in disguise. You can get your own home🏠 and claim tax deductions under Section 80C and Section 24 of the Income Tax Act.
- Under Section 80C, you can claim deductions of total annual income spent towards repaying the principal amount borrowed for purchasing or constructing a residential property up to Rs. 1.5 lakh.
- Under Section 24, the interest you pay (up to Rs. 2 lakh) for your home loan is exempt from tax.
- Even if you put your property on rent on which you have taken a home loan, the amount of money you are paying as interest is exempt from tax calculations.
Leave Travel Allowance
If your salary has a component named Leave Travel Allowance, then you can claim deductions on the same. For example, you can claim deductions for travel expenses for your vacations like train or flight tickets twice in four years.
Under Section 80G, you can claim deductions on your donations to charitable institutions like PM Fund or Indian Disaster Relief Fund. You can claim partial or complete tax exemptions given that the NGOs have an 80G certificate.
Look Into Investment
Are you still wondering how to save income tax on salary? What better way of saving on taxes than by investing? Yes, you got it right. Invest in the stock market and government schemes to earn higher returns and save on taxes📈!
- Public Provident Fund (PPF)- This is a government investment scheme. You can pay a maximum of Rs. 1.5 lakh yearly for a minimum of 15 years. The interest you earn on the money invested is tax-free!
- Equity Linked Savings Scheme (ELSS)- These are mutual funds with a minimum tenure of 3 years. If the returns from these mutual funds do not exceed Rs. 1 lakh, you don’t have to pay any taxes on the interest earned.
- Fixed Deposits (FD)- You can save up to Rs. 1.5 lakh on taxes if you invest in 5 years tax-saver FD. The interest you gain is, however, taxable.
- Sukanya Samridhi- This is a government scheme to secure the future of girl children by taking care of their higher education or marriage expenses. So, if you have a daughter below ten years of age, you can start investing in this scheme and ensure her bright future. The lock-in period is 21 years, or you can also withdraw it when she is getting married, whichever is earlier. There is no tax deducted on the mature amount or the interest earned.
Under Section 80, you can save tax if you take a loan to pursue higher education for yourself, your spouse, or your children📖. The tax deduction is claimed on the interest for the loan. There is no upper limit on this type of deduction. However, it is essential to note that these benefits are only available for the first eight years of the total loan repayment tenure.
Avail Health Insurance Benefits
Still, are you pondering on how to save income tax on salary? Then, a health insurance policy is your answer. In today’s world of increased medical costs and deteriorating health, health insurance is a necessity👩⚕️. The Income Tax Act has made it possible for you to save up if you purchase a health insurance policy for yourself or your family.
Under Section 80D, you can claim deductions up to Rs. 25,000 for money spent on health insurance premiums. For senior citizens, this benefit is stretched up to Rs. 50,000😄.
Plum Insurance offers group medical insurance plans at affordable prices. Their insurance includes but is not limited to COVID-19 care, maternity and newborn care, dental care, routine health checkups, unlimited doctor consultations. Plum Insurance has a holistic approach towards medical insurance, and therefore, they also take care of your mental wellness. The entire process is made simple through digital claims.
If the process of paying income tax is becoming a burden on you, that means you have not correctly planned your taxes. We hope this blog answers your questions on how to save income tax on salary. If you follow and implement these deductions while filing your income tax returns, we promise you will see a substantial reduction in the taxes you pay.