When it comes to saving taxes, everyone desires to maximize their savings without breaking any laws. With the ever-changing tax laws in India, it is essential to have a solid understanding of the various deductions and exemptions available to save as much money as possible. This blog post aims to guide taxpayers on how to maximize their tax savings in India through tips and tricks that are legal and practical. So, if you are looking to save money on taxes this fiscal year, keep reading to learn about effective strategies to help you keep more of your hard-earned money.
Here are some tips and tricks to maximize your tax savings in India:
➤ Invest in Tax-Saving Instruments
Investing in tax-saving instruments is a great way to maximize your tax savings in India. The Indian government offers various tax-saving instruments, such as Public Provident Fund (PPF), Equity-Linked Saving Scheme (ELSS), National Pension System (NPS), and tax-saving fixed deposits (FDs). Investing in these instruments can help you claim deductions under Section 80C of the Income Tax Act and reduce your taxable income.
The government of India offers several tax-saving investment options, including:
➤ 1) Public Provident Fund (PPF):
PPF is a long-term investment option that offers tax-free interest and maturity proceeds. The investment made in PPF is eligible for deductions under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakh.
➤ 2) Equity-Linked Saving Scheme (ELSS):
ELSS is a mutual fund scheme that invests primarily in equities and offers tax benefits under Section 80C. Investments in ELSS are subject to a lock-in period of three years.
➤ 3) National Pension System (NPS):
NPS is a voluntary pension scheme that offers tax benefits under Section 80C and Section 80CCD. The scheme allows you to contribute towards your retirement fund and offers flexibility in choosing your investment portfolio..
➤ 4) Tax-saving fixed deposits (FDs):
Tax-saving FDs are special fixed deposits that offer tax benefits under Section 80C. The investment made in tax-saving FDs is subject to a lock-in period of five years.
➤ 5) Senior Citizen Saving Scheme (SCSS):
SCSS is a savings scheme that offers regular income to senior citizens and offers tax benefits under Section 80C. The scheme has a lock-in period of five years and offers attractive interest rates.
By investing in these tax-saving instruments, you can not only save taxes but also build a diversified investment portfolio that helps you achieve your financial goals. However, it is important to understand the risks associated with each investment option and choose the one that best suits your investment objectives and risk appetite.
For an elaborate strategy on A Beginners Guide to Indian Income Tax Filing in 2023 click on linked article
Claim Deductions for Medical Expenses
Medical expenses can be a significant financial burden, and the Indian Income Tax Act offers certain deductions to help taxpayers alleviate this burden. You can claim deductions for medical expenses under Section 80D of the Income Tax Act. You can claim up to Rs. 25,000 for medical insurance premiums paid for yourself, your spouse, and dependent children, and up to Rs. 50,000 if you or your spouse is a senior citizen.
Here are some ways to claim deductions for medical expenses:
➤ 1) Deductions for medical insurance premiums:
Under Section 80D of the Income Tax Act, taxpayers can claim deductions for medical insurance premiums paid for themselves, their spouse, and dependent children. The maximum deduction allowed is Rs. 25,000 for individuals and Rs. 50,000 for senior citizens.
➤ 2) Deductions for medical expenses incurred for specific diseases:
Under Section 80DDB of the Income Tax Act, taxpayers can claim deductions for medical expenses incurred for specific diseases such as cancer, neurological diseases, and chronic renal failure. The maximum deduction allowed is Rs. 1 lakh for senior citizens and Rs. 40,000 for individuals..
➤3) Deductions for medical expenses incurred for disabled dependents:
Under Section 80DD of the Income Tax Act, taxpayers can claim deductions for medical expenses incurred for the treatment of disabled dependents. The maximum deduction allowed is Rs. 75,000, and for severe disability, the maximum deduction allowed is Rs. 1.25 lakh.
➤ 4) Deductions for medical expenses incurred for self or family members with disabilities:
Under Section 80U of the Income Tax Act, taxpayers can claim deductions for medical expenses incurred for the treatment of self or family members with disabilities. The maximum deduction allowed is Rs. 75,000, and for severe disability, the maximum deduction allowed is Rs. 1.25 lakh..
Also Read :- GST Return Filing Everything You Need to Know
Use HRA to Claim Rent Deductions
If you are a salaried individual and receive a house rent allowance (HRA), you can claim deductions for rent paid under Section 80GG of the Income Tax Act. You can claim a deduction of up to Rs. 5,000 per month or 25% of your total income, whichever is lower.
Here is how you can use HRA to claim rent deductions:
➤ 1) Choose a qualified charity:
To claim tax benefits, you need to donate to a charity that is recognized by the Income Tax Department and has been approved under Section 80G of the Income Tax Act. You can check the list of approved charities on the Income Tax Department's website.
➤ 2) Determine the eligible amount:
The eligible amount for tax benefits varies depending on the type of charity and the mode of donation. Generally, donations made through cheque, online transfers, or credit/debit card payments are eligible for tax benefits. The eligible amount can be the full amount donated or 50% or 100% of the amount donated, depending on the charity's category.
➤ 3) Collect the receipt:
To claim tax benefits, you need to collect a receipt from the charity for the donation made. The receipt should include the name and address of the charity, the PAN of the charity, the amount donated, and the date of the donation.
➤4) Claim tax deductions:
You can claim tax deductions for the amount donated under Section 80G of the Income Tax Act. The maximum deduction allowed depends on the charity's category, and it can be up to 100% of the amount donated.
Donating to charity not only helps you save taxes but also contributes to society's welfare. It is important to choose a qualified charity and maintain proper documentation of the donation to claim tax benefits appropriately..
