Income tax saving options: Every government imposes taxes on the incomes of its citizens. Taxes fund the construction of bridges, railways, roads and other pieces of infrastructure. Through income tax, governments help the weaker sections of society.
If taxpayers aren’t careful, they might end up paying a substantial part of their incomes as taxes. There are several clauses in the Income Tax Act of 1961, which help taxpayers reduce their tax liabilities and maximize incomes.
Utilizing exemptions and deductions
The Income Tax department allows individual taxpayers to claim various exemptions and deductions. By claiming these deductions, taxpayers can reduce their taxable salary.
- Under Section 8C, taxpayers can invest in Public Provident Funds, Employee Provident Funds, National Saving Certificates, life insurance schemes and also the Equity Linked Saving Scheme (ELSS). After investing in these instruments, the taxable salary of a taxpayer goes down substantially.
- Section 24(b) – Under this section of the Income Tax Act, taxpayers can claim benefits on the interest component of their home loan payments.
- Section 10(4) – This section allows taxpayers to take benefits from the rent paid for their homes (House Rent Allowance), payments made towards medical expenses (Medical Allowance) and travel-related payments (Leave Travel Allowance).
Making smart investments
Taxpayers can maximize their net incomes by investing smartly. For example, they can invest in the National Pension Scheme and claim benefits under Section 8CCD(1B), which is over and above Section 80C.
If you have multiple properties in your name, the Income Tax department allows you to claim deductions for the home loan paid on the rented property, without any limit.
Banks have various fixed deposit schemes which offer varying rates of interest. By investing in these schemes, salaried employees can gain in the long term while reducing their taxable income.
Women employees have different tax brackets than men. This means they can save more annually on their taxable income.
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