Learn The Strategies To Save Income In India In 2022
Income tax is the tax that is payable by an individual on an income received by them. They are a huge revenue to the government and are vital for the smooth function of governmental activities. They are also a requisite when the country is looking forward to progress economically and development-wise. The Tax varies according to your income level as well.
All of us are keen to find different ways and methods to avoid tax and none of us likes to avoid opportunities whereby we can avoid tax. Different people follow different methods. Some follow the methods they already know and miss out on efficient other ways to save tax. This article will provide you with a list of ways to avoid tax implications legally. Mutual funds, medical insurance, insurance premiums, home loans, etc. are some ways prescribed by law to claim deductions on your cash amount.
What Are Some Methods to save tax?
You do not evade tax. Tax evasion is a felony. Instead, you can save taxes by incorporating tax planning. Some of the methods to save tax include
- A Home loan: Most of us Indians dream about owning a home and by availing of a home loan to buy a property you are eligible for a tax deduction and own property as well. Some schemes such as PMAY (Pradhan Mantri Awas Yojana) and DDR (Delhi Development Authority) Housing scheme are some schemes that make housing affordable in India. In addition to all this section 80C and Section 24(b) helps in reducing the tax burden as well. Section 80C provides that you are eligible for a tax reduction on the entire income spent against the repayment of the amount borrowed by you up to a limit of Rs. 1.5 Lakhs under the ambit of Section 80C of the Indian Income Tax Act. You can also file for a tax reduction on the interest on the home loan availed under section 24(b) up to a value of Rs. 2 Lakhs on yearly basis. In addition to this, if you put up the newly purchased property on rent, then you will be eligible for a deduction on the interest while calculating your annual income tax. If you have purchased the property to construct a home, then you are eligible for a deduction under section 24(b) if the construction projects are completed within five years. The deductions under section 80EEA are also applicable if you are a first-time homeowner as well. You can also get a waiver of up to Rs. 1.5 Lakhs in addition to the deductions available under section 24(b) I the stamp duty value of the property is less than Rs. 45 Lakhs.
- Health Insurance Policy: Health insurance policy is important and necessary as the health of the people has been deteriorating daily in India. By availing of such a policy, you will be able to provide your family and yourself access to good healthcare facilities. The government has also extended its hands to ensure a healthy India by granting tax deductions to stimulate individuals to get their health insurance policy. The deductions are granted under section 80D of the IT Act and different amounts are deducted based on the age of the insured.
Health insurance for individuals, their spouse, and their children (below 60 years)
Up to ₹25,000
For individuals and parents (below 60 years)
Up to ₹50,000 (₹25,000 + ₹25,000)
For individuals that are below 60 years of age and their parents that are Senior Citizen
Up to ₹75,000 (₹25,000 + ₹50,000)
For individuals and parents (both above 60 years)
Up to ₹1,00,000 (₹50,000 + ₹50,000)
- Investments: By investing in the capital market and also the government-mandated schemes you can earn yourself an income and also save tax. Section 80C provides a list of investment instruments that you can invest into avail tax deductions. REITs is one of the options along with the ELSS (Equity Linked Savings Scheme) and others. By investing in ELSS you will be eligible for a tax reduction of up to Rs. 1.5 Lakhs within a three-year lock-in period. In addition to this, if the capital gain of the property exceeds more than one lakh, then no tax is payable on the profit benefited from these properties. Another option whereby you can avail of tax deduction is by investing in a 5-year fixed deposits option. Section 80C provides for any tax deduction for an investment which amounts up to Rs. 1.5 Lakh.
- Government Schemes: By investing in government schemes you can also avail further tax benefits along with high returns. You can avail of a tax deduction under Section 80C for a value up to Rs. 1.5 Lakh. Some of these government schemes include Senior Citizen Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY), National Pension Scheme (NPS), Public Provident Fund (PPF), National Pension Scheme (NPS), etc.
- Deductions on your rented Premises: You can also save tax by renting out your property according to the provisions of Section 10 (13A) under the head of House Rent Allowance (HRA). To avail of the benefits of this section, your salary must have a breakup including HRA. You can calculate the deduction by taking the following:
- Annual HRA that has been received
- 50% of the yearly salary if the person is residing in the metro city while 40% in case he is residing in non-metro areas.
- Deduct 10% of your basic salary from the total rent amount you received.
- 20% of the gross total income
How to reduce your tax expenses is one of the most important questions to consider if you are a tax-paying citizen. All these options can be used to reduce the total taxable amount for a stipulated financial year. Some of the other ways to get a tax deduction include opting for a life insurance policy, charity, supporting a political party, etc. It is not only important to know just the ways to avoid tax and should consider different options to maximize your profit along with the deductions. Real estate is one of the best options as it is a dream for many to have their own home. Real estate is also long-term financial security that appreciates over time. By investing in rental properties you can not only earn tax reductions but also a stable income. Assetmonk is a smart platform for real estate investments. We offer products with both long-term and short-term benefits. Assetmonk offers a wide range of products such as commercial, residential, senior-living, co-living, etc. in cities such as Bangalore, Chennai, and Hyderabad.
Frequently Asked Questions on Tips to Save Tax in India:
An ITR can be filed online or offline and to file it online you will have to log into the official income tax portal. Then you are required to select the submission mode by clicking on the ‘prepare and submit online’ option. While making an online application, you may also import information from the latest ITR or Form 26AS.
Some of the tax-free investments include the municipal bond, tax-exempt mutual fund, tax-exempt exchange-traded funds, indexed universal life insurance, Roth IRAs and Roth 401(k) Plans, health savings account, etc.
One of the best ways to tax is by investing in rental real estate properties. There are several benefits mentioned within the Income Tax Act for rental properties. By investing in real estate you not only avail of tax reductions but also benefits of capital appreciation, capital gains, and also a stable income.
Some of the methods of reducing taxable income in India include taking a home loan to invest in real estate, availing of health and life insurance policies, government-approved investments and schemes, etc.