Save Some Income Tax: 10 Tips You Did Not Know About Before

India allows for tax saving schemes and investments when it comes to medical insurances. These deductions are centred on medical expenditure, and the details are outlined in Section 80D. However, tax saving is not limited to only these options!

1. Pay Rent and Reduce Tax

Employers provide House Rent Allowance (HRA), a part of which can be used for tax saving. In case accommodation is not provided by the employer and rent comes out of your pocket, the rent can be deducted from gross taxable income.

Depending on the situation, lowest of the following options is deducted from the gross income:

• HRA provided by employer
• 50% of the basic salary + Daily Allowance (DA) if the employee is living in Delhi, Kolkata, Mumbai or Chennai. For other locations, 40% of basic salary + DA
• House rent amount paid – 10% of basic salary + DA

2. Investments Reduce Tax

Tax rebates are applicable for certain investments, the details of which are outlined in Section 80C. Many such investments fall under the EEE category implying that taxes are exempted during all the three stages of investment, earning and redemption. Some such investments are:

i. EPF accounts

Employee Provident Fund not only acts as a retirement planning option, but also the amount invested is not taxable.

ii. PPF account

Another retirement planning option, except it is a long-term forced savings scheme by the government. The maximum contribution can be Rs. 70,000. The interest earned (@ 8%) and maturity amount are tax-free. This is one of the best tax exemption investment options.

iii. Equity Linked Saving Scheme (ELSS)

ELSS is an equity based investment option that invests in the share market. There are chances for getting high returns while providing tax rebate on the invested amount.

3. Life Insurances

Not only do Life Insurance Plans provide a financial buffer in case of emergencies, but also ensures that the premium paid is deducted from the gross income. This implies that your taxable income is less. The upper limit for this benefit if Rs. 1 lakh.

Also, any proceeds from maturity or surrender of life insurances are exempt from all taxes, only if the premium was not more than 20% of the amount assured.

4. Selling Equity Mutual Funds

In the case of Long Term Capital Gains, the profits made are 100% tax-free.

For example, if you invest 10,000 INR in some fund and after 11 months it amounts to 15,000 INR, generating a profit of 5,000 INR. Then, if you hold the investment for more than one month, you won’t have to pay any tax on the profit.

5. Agricultural Income Means Tax-Free

In India, all income generated from Agricultural land is exempted from taxes. Such as:

• Rent derived from the land
• Income from agriculture-related products
• Income generated from farm building

Hindu Undivided Family (HUF) for Additional Income

In the case of additional income, the secondary income is deposited to the HUF account. The normal income tax rates are applicable to the salary deposited in the salary account. The HUF account income is subject to lower rates.

This benefit is extended to all Hindu, Sikh and Jain families in India.

Home Loans and Tax Saving

• If the principal amount is repaid in the current financial year, then the tax deduction offered is a maximum of 1,50,000 INR.
• If your present home is on loan, even then you are eligible for a loan on another house. There is no upper bar on the income tax rebates on the interest payment of the second home loan.

The tax deduction can be increased with the joint home loan scheme for families.

8. Education Loans are Tax Savers

According to Section 80E, interest on education loan of any amount is not subject to any taxes. All higher studies education loans for self, children or spouse, is applicable to this benefit.

Capital Gain Taxes

Salary holders are not liable for any capital gains taxes on their investments. You can set off your capital gain of one investment with the capital loss of another. Also, a capital loss can be carried forward up to 8 years.

Marriage Gifts

All presents received in the form of cash, cheques, money bonds, etc. are not liable for any taxes. Also, gifting money to people makes that amount tax free.

Prateek is a seasoned independent writer. His explanatory and creative writing style helps understand the subject matter easily and offers tips, tricks and expert suggestions for Star Health Insurance polices..