At the end of a fiscal year, paying income tax is a difficult task for the majority of people. Planning the reporting of insurances, rent, and other receipts in a way that results in the lowest feasible tax liability accounts for the majority of the effort.
Planning your income taxes need not be a difficult task if you take careful consideration of every part of your income. While some tax-saving strategies are fairly popular, if your tax band is higher, you can use uncommon strategies to maximise your savings. The top 7 are as follows:
Contribute more towards National Pension Scheme
If you are an NPS subscriber, you may be eligible for a tax break under Section 80 CCD (1), with a maximum overall benefit of Rs. 1.5 lac under Section 80 CCE. You might not be aware that Section 80CCD(1B) of the Income Tax allows for an additional deduction of Rs. 50,000. Thus, boost your national pension system contribution to reduce your tax burden.
Deductions for Children’s tuition fee
Whether your child attends a school, university, college, or another institution, you can deduct the cost of their tuition from your income if you are a parent. The most that can be deducted from tuition fees in a financial year, along with deductions for insurance, provident fund, pension, and other investments, is Rs 1.5 lakh. There is a two-child maximum for this deduction.
In India, a wedding is a significant event. The visitors give the pair a tonne of gifts. According to Section 56, certain gifts are exempt from taxation (2). Presents given to you on the day of your wedding, whether they come in the form of a gift, money, or a check, are tax-free. This implies that you are eligible to claim tax advantages for the gifts you receive from friends and family.
Make your investments through parents
Special tax incentives are available to senior citizens. If your parents make a low income, you can reroute your investment income. Hence, if you earn Rs. 1 lakh in interest, you can transfer the money to them tax-free rather than putting it in your taxable income for the year. Your parents can receive this money tax-free as a gift. They can reinvest money in profitable senior citizen programmes like Senior Citizens’ Savings Schemes, Senior Citizens’ FDs, and others.
Money Spent on Donation/Charity
For charity donations and philanthropic endeavours, tax deductions may be claimed. Some donations qualify for a 100% deduction while others just for a 50% deduction, depending on the purpose. You should be aware that only contributions made in cash or via check qualify for tax deductions.
Note: Cash is allowed up to Rs 2000.
Expenses for Telephone and Internet
Telephone reimbursement given to employees is not taxable, according to Regulation 3(7)(ix). You are entitled to a full exemption of the billed cost if using a mobile, telephone, or internet connection is necessary for your office work.
Pay for Parent’s Health and Health Insurance
A taxpayer may deduct up to Rs 25,000 under Section 80D. It can be used to pay for both your family’s and your own health insurance premiums. You can take advantage of an additional tax deduction under section 80D if you pay the premium for your parents’ health insurance.
Also, even if your parents don’t have health insurance coverage, you can still deduct up to Rs 50,000 for medical expenditures incurred during the tax year.
There are many such ways available which can be utilized by taxpayers to save taxes.