More than 6 crore people file income tax returnsevery year and the numbers are increasing each year. The Government is making every possible step to increase their direct tax revenue by motivating people to file their returns. When the Government is making effort at its best to augment tax revenues, individuals should also be aware of the manner they can save income tax while following the tax laws. Are you familiar with the tax rates in India? Let’s first start with the tax rates and then move to the main topic of this article.
Income Tax Slab Rates in India
Taxable Income
Income Tax Rates
Up to Rs. 2,50,000
NIL
Rs. 2,50,001 to Rs. 5,00,000
5% of the total income exceeding Rs. 2,50,000
Rs. 5,00,001 to Rs. 10,00,000
20% of the total income exceeding Rs. 5,00,000
Above Rs. 10 Lakhs
30% of the total income exceeding Rs. 10 Lakhs
In addition to the above, the health and education cess is also payable at the rate of 4% of the total tax. In the case of people having an income of more than Rs. 50 Lakhs, an additional surcharge is also levied upon the total tax. These tax rates seem to be quite high but you need not worry as there are many tax-saving provisions under Income Tax Act, 1961 which will come to your rescue.
So, let’s start reading your comprehensive guide on the issue “How to Save Income Tax in India?”. This will certainly be helpful to you in saving your tax burden within the legal framework of the country.
Save income tax by taking a housing loan
One of the most advisable alternatives for tax saving in India is “Taking a Housing Loan”. The Government of India has a vision of “Housing for All” for which it gives special concessions under the Income Tax Act. So, why not avail of those concessions?
Do you know that principal of a housing loan repaid by you is eligible for deduction under section 80C of the Income Tax Act? You can claim a deduction of up to Rs. 1.50 Lakhs under section 80C for housing loan principal. Further, the interest element of a housing loan is also eligible for deduction up to Rs. 2 Lakhs under “Income from House Property”. Thus, you can reduce your total taxable income by Rs. 3.50 Lakhs. Moreover, the additional deduction is also available in case of loans taken in respect of affordable house property.
One more interesting thing to know is that if you let out your house property, the entire interest element of the housing loan is allowed as a deduction under section 24 of the Income Tax Act.
Save tax by investing in life insurance
Life insurance policies are one of the most opted tax benefits by the taxpayers as life insurance comes with multiple benefits of tax rebate u/s 80C along with tax-free maturities.
Premium paid towards life insurance policies is allowed as a deduction from your total income up to Rs. 1,50,000 under section 80C, provided it is less than 10% of the total sum assured if the policy is taken on or after 1st April 2012. Sum assured received on such life insurance policies is also exempted from any tax calculations under section 10(10D) subject to rules therein. You may also opt for notified pension plans under section 80CCC for which benefits can be taken up to the limit of Rs. 1,50,000 including deductions under section 80C.
If you are not a traditional investor and like to invest in dynamic insurance products coupled with tax benefits, you may invest in Unit Linked Insurance Plans (ULIP), where the portion of your investment is channeled to the stock market. Thus, it gives you tax benefits along with gains from movements in the stock market. But please note that ULIP comes with a minimum lock-in period of 5 years till then you cannot withdraw your money. Please note that income tax return filing is also equally important as without ITR filing you will not be able to claim deductions under section 80C.
Save tax by buying a health insurance policy
Covid-19 has made us learn a good lesson that health insurance is not an option but a necessity. With rising medical costs in India, health insurance has become a compulsion. Then why not take the tax benefits of health insurance?
The Indian Government too wants to promote health insurance so it allows tax deductions under section 80D of the Income Tax Act. Individuals can claim a deduction under section 80D towards the health insurance premium paid by them. However, the quantum of tax deductions is subject to the age of the insured person.
If you are paying health insurance premiums for your family including your spouse and kids, you can claim a deduction of up to Rs. 25,000 under section 80D. Further, on making payment of the health insurance premium of your parents, you will get an additional deduction of Rs. 25,000. However, if you or your parents are senior citizens (age above 60), then, you can claim a deduction of up to twice the amount given above. Thus, you can manage a deduction of up to Rs. 1,00,000 on payment of health insurance premium. File ITR online to claim deduction u/s 80D.
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