Income Tax News: Earning over Rs. 75 lakhs a year puts you in a high tax bracket in India. But that doesn’t mean you have to hand over a bigger chunk of your income to the government! With smart tax planning and utilising available deductions, you can significantly reduce your tax burden. Here are some effective strategies to help high earners like yourself save tax:
Utilise Section 80C Deductions
This is a powerhouse section offering tax deductions for up to Rs. 1.5 lakhs on various investments. Popular options include:
- Equity Linked Saving Schemes (ELSS): Invest in the stock market while saving taxes. ELSS offers potentially high returns with a lock-in period of 3 years.
- Public Provident Fund (PPF): A safe, long-term investment with attractive interest rates and a 15-year lock-in period.
- National Savings Certificate (NSC): A low-risk investment with guaranteed returns and a maturity period of 5 or 10 years.
- Life Insurance Premiums: Secure your future and save tax by paying premiums for life insurance policies.
Invest in Health Insurance
Take advantage of deductions under Section 80D for health insurance premiums paid for yourself, your parents, spouse, and dependent children. This promotes good health and reduces your tax liability.
Claim Tax-Exempt Allowances
Reduce your taxable income by claiming tax exemptions on allowances provided by your employer, such as:
- House Rent Allowance (HRA): If you pay rent, claim this allowance to offset your housing expenses.
- Leave Travel Allowance (LTA): Utilise this allowance to cover travel expenses for your vacations.
- Reimbursements for Medical and Educational Costs: Get reimbursed for medical bills and children’s education expenses, reducing your taxable income.
Boost Savings with National Pension System (NPS)
Invest in your retirement while saving tax under Section 80CCD(1B). You can claim deductions for contributions of up to Rs. 50,000 to NPS on top of the Rs. 1.5 lakh limit under Section 80C.
Explore Tax-Efficient Investments
Consider investment options like Unit Linked Insurance Plans (ULIPs) or endowment plans that offer a mix of insurance coverage and market-linked returns with tax benefits.
For a personalized tax-saving plan tailored to your needs, consult a financial advisor. They can help you make the most of your tax breaks.
