Income Tax News: Income tax is a vital source of funding for the Indian government, and all individuals are required to pay taxes on their earnings. You are classified as a high-income earner and are subject to the highest income tax bracket if your salary exceeds the income tax on 50 lakhs salary. To reduce your tax obligation and increase your take-home pay, you must have a strong tax-saving strategy. The topic of this article will be tax savings strategies for salaries over ₹50 lakhs.
Practical Tax Saving Techniques for Salary Above ₹50 Lakhs
Invest in Tax-Saving Instruments
Purchasing tax-saving investments is one of the best ways to reduce your tax liability. Investing in different tax-saving options can allow you to claim a deduction of up to ₹1.5 lakh under section 80C of the Income Tax Act, 1961. Public Provident Fund (PPF), National Pension System (NPS), Equity-Linked Savings Scheme (ELSS), and tax-saving fixed deposits (FDs) are a few of the well-known tax-saving options. These investments provide respectable returns in addition to tax savings.
Utilise Section 80D for Health Insurance
In addition to the Section 80C deductions, you are also eligible to claim Section 80D deductions for health insurance. Up to ₹ 25,000 can be deducted from your taxes for health insurance premiums that you, your spouse, and your dependent children have paid. You are eligible to deduct an extra ₹50,000 from your parents’ health insurance premiums if they are elderly. Thus, you can protect yourself and your family from medical emergencies and save money on taxes by purchasing health insurance.
Maximise Home Loan Benefits
Under Section 80C and Section 24 of the Income Tax Act, you are eligible to deduct principal and interest payments if you have taken out a home loan. For a self-occupied property, you can deduct up to ₹ 2 lakh from the interest you pay on a home loan. In addition, Section 80C allows you to deduct up to ₹1.5 lakh from the principal repayment. You can deduct the whole interest paid on your home loan from your rental income if you have rented out the property. As a result, taking out a home loan gives you the opportunity to own a valuable asset in addition to saving income tax on 50 lakhs.
Make Use of LTA
Employers also offer the Leave Travel Allowance (LTA), which is another tax benefit. For you and your family, you are eligible to deduct taxes on certain domestic travel expenses. You may deduct the LTA benefit twice in a period of four years, and in order to do so, you must present your travel receipts. Nevertheless, the LTA benefit can only be used for domestic travel; it cannot be claimed for overseas travel. Consequently, you can arrange your domestic travel so that you can save taxes and take advantage of the LTA benefit.
Opt for NPS
For high-income earners looking to save taxes and accumulate retirement savings, the National Pension System (NPS) is a great investment option. Investing in NPS entitles you to an extra deduction of up to ₹50,000 under Section 80CCD(1B) of the Income Tax Act. The NPS plan gives you the advantage of compounding returns over an extended period of time in addition to tax savings.
House Rent Allowance (HRA)
You are eligible to deduct taxes from your employer’s House Rent Allowance (HRA) if you live in rented housing. Your actual rent and salary are used to calculate the HRA benefit. The actual HRA received, 50% of your basic salary if you live in a metro area, or 40% of your basic salary if you live in a non-metro area is the lowest of the three amounts that can be deducted from taxes. Consequently, by taking advantage of the HRA benefit, you can lower your tax obligation.
Plan Your Capital Gains
You might be required to pay capital gains tax on your profits if you have investments in stocks, mutual funds, or real estate. On the other hand, you can invest in tax-saving alternatives like real estate, the National Pension System (NPS), and equity-linked savings plans (ELSS) to plan your capital gains. By making an investment in these options, you can reduce your capital gains tax liability and qualify for deductions under Sections 80C and 80CCD.
Opt for a Lower Tax Regime
In order to incentivize people to give up their deductions and exemptions, the Indian government has instituted a reduced tax regime. You can choose the lower tax regime and save money if your salary exceeds the income tax threshold of 50 lakhs. Individuals earning between ₹50 lakhs and ₹1 crore are subject to a 30% tax rate under the new regime, while those earning more than ₹1 crore are subject to a 35% tax rate. You must, however, determine your tax liability under the old and new regimes and select the more advantageous option before deciding to adopt the lower tax regime.
Disclaimer: This information is intended for general knowledge only. Any financial decisions should be made in consultation with a qualified professional. DNP News Network Private Limited is not liable for any financial losses incurred based on the information provided here.
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