Reducing tax liability and maximizing savings in India can done by a three-pronged strategy covering tax-friendly investments, incurring deductible expenses, and claiming deduction on interest paid on home and education loans. Compare the pros and cons of all available options before finalizing your tax strategy.
Following are some easy to follow steps that will give you a clear idea on how maximize your tax savings:-
# Invest money in Different Schemes: Invest in insurance policies, ULIPs, Provident Fund, National Savings Certificates, Equity Linked Savings Schemes, pension funds, and tax-friendly fixed deposits to enjoy a deduction of up to Rs. 1.5 lakhs under Section 80 C, 80CCC, and 80CCD of the Income Tax Act.
# Invest in NPS: Invest money in National Pension scheme along with other tax saving options to enjoy an additional deduction of Rs. 50,000 under Section 80CCD. Combining this tax planning option with 80C, 80CCC, and 80CCD investments offers extra tax saving by enhancing the maximum limit of deductions from Rs. 1.5 lakhs to Rs. 2 lakhs.
# Claim Deductionson health insurance premiums and medical expenses from your taxable income.
1) Under Section 80 D, health insurance premiums of up to Rs. 30,000 for senior citizens and Rs. 25,000 for others can be claimed as deduction.
2) Under Section 80 DDB, certain medical expenses very senior citizens are deductible up to Rs. 30,000 per year.
# Claim deductions on interest paid on housing loans and educational loans.
1) Section 80E allows assessees to deduct the entire interest paid on educational loans from their taxable income over a period of maximum of eight assessment years.
2) Section 24 (b) allows the interest paid on home loans up to a maximum amount of Rs. 2 lakhs to be claimed as deduction. Interest paid on under-construction homes can be claimed in five installments after the completion of construction subject to the conditions imposed by the law.
As experts, we have listed some recommendations that will keep you in good stead while saving your taxes:-
· Keep proofs of tax saving investments handy for quick submission to the authorities in the event of a query or notice.
· Finalize investments before the end of the financial year in order to claim the money paid as deductions.
· Consider the tax implications of obtaining a joint home loan in advance to avoid increased liability in the future.
· Certain investment and expenditure-related deductions cannot be carried forward to the next Assessment Year. Make sure you claim the deductions before it lapses.
· Certain tax planning in India deductions are available only for individuals. Make sure you are eligible for the deductions before claiming the same.
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