Tax planning is one of the fundamental ways in which you save a substantial amount every year, completely legally and without too much effort. Most people end up paying much more in taxes than they are minimally obliged to, simply because they do not understand the tax laws clearly.
However, saving taxes is not as difficult a task as many people make it out to be. With a few tax saving tips and a little effort, anyone can save taxes and claim tax benefits. Here are a few easy which you might find helpful.
Tax benefits from home and education loans
You can claim tax benefits from the principal and interest amount of your home and education loans. The deductions for home loan EMI is covered under section 80C, 80EE and section 24 of the Income Tax Act. Education loan deductions are covered under section 80C and 80E of the same.
There is no upper limit on the deduction amount for education loans. However, one must remember that these deductions are applicable for 8 years from the time you start the repayment.
Tax limits for home loans at Rs. 1.5 Lakh.
In effect, if you take an Education Loan or Home Loan from NBFCs like Bajaj Finserv, you can claim tax deductions while repaying them. These financial institutions typically offer flexible tenors and easy terms for repayment with a minimum documentation process.
Public Provident Fund
Depositing money in a PPF account is one of the most commonly used tax savings plan by salaried people. The IT Act allows deductions of up to Rs. 1.5 Lakh if a person deposits their money in a PPF account.
However, it must be remembered that there is a lock-in period of 15 years for withdrawing money from this account. The Government announces the interest rate of PPF accounts regularly. Effective 1st January, 2019, it stands at 8%.
National Pension Scheme
The National Pension Scheme (NPS) is a government initiative which allows a tax deduction of Rs. 50,000. It is over and above the 1.5 Lakh deduction already allowed for PPF.
It is covered under the section 80CCD of the IT Tax. It is one of the best tax savings tips for business owners and salaried individuals.
According to section 80D of the IT Act, one can avail tax benefits of up to Rs. 25,000 on the amount of insurance premium. A further 30,000 can be claimed on medical expenses for oneself or the family.
These are some of the most popular tax savings tips for salaried individuals. Do not pay more taxes than you are required to. Be tax wise!
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