When you file your income tax return each year, you should look for ways to save cash on taxes. Tax savings is one of the best things you can do for your money. Not only do you have more cash in your pocket, but you also.
There are numerous legal methods to lower your taxable income and, by extension, your tax bill. You can reduce the taxes you owe even if you don't invest in anything. The important thing is to know how to take full advantage of all the deductions you can.
Deductions Under Sections 80C, 80D, and 80EE
Most people own a home and pay an insurance premium. Under the Income Tax Act, you can obtain a tax break if you do something similar. Here's how it works:
Under section 80C of the Income Tax Act, you can get a tax break of up to Rs. 1.5 lakh if you pay off the principal on your home loan. It pays for big expenses like PPF, NSCs, ELSS, EPF, and LIC investments. ELSS is the most popular choice because it offers market-linked returns and tax-free income.
Under section 80C, you can also pay for your own and your children's college tuition, pay off your home mortgage principal (up to Rs. 1.5 lakh), pay stamp duty and registration fees when you buy a home, or put money into the National Pension Scheme (NPS).
Under section 80D of the Tax Act, you can deduct up to Rs. 25,000 for medical insurance premiums paid in a fiscal year. It lets you deduct the costs of medical insurance, precautionary health checks, and medical care for certain diseases that affect your elderly relatives.
The most you can deduct is Rs. 25,000 or Rs. 30,000, depending on how old the insured person is. This amount can go up to Rs. 50,000 if an insurance policy covers other family members. The restriction is Rs. 30,000 for senior citizens and Rs. 50,000 if their family members are also covered by their insurance policy.
Under section 80EE of the Tax Act, you can deduct up to Rs. 50,000 of the interest you paid on a home loan. This section lets you deduct the interest you pay on your home loan. The individual can get a total of Rs. 50,000 deductions per financial year.
For this benefit to apply, your home must either be under construction or have been bought within the last five years. Also, the property's value shouldn't be more than Rs. Fifty lakhs and your home loan shouldn't be more than Rs. 35 lakhs.
Children's tuition fees and a hostel allowance
Under Section 10(14) of the Income Tax Act, you can claim a schooling allowance of up to Rs. 100 per month per kid for a maximum of two children. However, you can't get this if your company has already given you something similar.
In the same way, Section 10(14) of the Income Tax Act says that you can claim a Hostel allowance of up to Rs. 300 per month per child if your employer hasn't already given you something similar. You also can claim a deduction under Section 80C of the Tax Act 1961 for the money you spent on your children's tuition.
Under this segment, you can claim a deduction of up to Rs 1 lakh for the tuition fees you paid for your children's education in private and public schools, such as playschools, pre-nursery schools, and similar places.
Interest Paid on Mortgages Can Be Deducted
One of the effective methods to save on taxes when making monthly EMI payments is to get a home loan. Under section 24 of the Income Tax Act of 1961, you can write off up to Rs 2 lakh per year of the interest you pay on your home loan. You can lower your taxes by deducting the interest you paid on a home loan you took to purchase or build a house.
Section 24 says you can take up to Rs 2 lakh off your tax liability if you reside in the house and pay the home loan. In the same way, if it's a home you live in, and you haven't started paying back the loan yet, you can still get a deduction for up to 5 years after the house was built. This deduction, though, will only be worth up to Rs 30,000 per year.
House rent and transportation allowance
There are numerous ways to save tax money without investing, but the most common is to claim House Rent Allowance (HRA). This can be claimed by people who have jobs and live in rented homes. A person can get an HRA exemption if they live in a place that he owns or rents and pays the rent for.
The landlord's PAN number should be given to get the exemption. Whether you can use HRA as a tax break depends on where you live, how much mortgage you pay, etc. Section 10(13A) of the Income Tax Act says an employee can get an HRA tax break.
Section 80GG lets an employee take a tax deduction for rent paid if they don't get HRA or don't own a home that they live in themselves. You can deduct Rs 5,000 monthly or 25% of your total income. Transport Allowance is money an employer gives an employee to help them get from home to work.
The most that can be given for transport allowance each year is Rs 19,200. If an employee needs a car for work, the employer pays for the gas costs. But an employee must show receipts to get a tax break under Section 10.
Employees' Provident Fund (EPF)
EPF is a retirement benefit plan in which the employer and the worker put in 12% of their basic pay. The Central Government decides every year what the interest rate is for the EPF. Any amount that is put into this fund is not taxed.
The employer puts 12% of the employee's basic pay and dearness allowance into the Employees' Provident Fund (EPF). The Ministry of Labor and Employment decides the interest rate on the provident fund, or PF, will be. At the moment, it is around 8.65%.
The interest earned through the Employees' Provident Fund (EPF) and the lump sum amount taken out at the end of the plan are not taxed. Under Section 80C, you can also get a tax break if you put more money into your EPF account than your employer.
To get a tax break under Section 80C for the money you put into your PF account on your own, you need to give your employer Form 12BB, Form 10C, and proof of your investment. After this is taken out, your employer will take taxes out of your pay.
You can get a tax break for the interest you paid on your student loans. The amount of interest will not be taxed up to Rs 1,50,000 per year. There is no limit on how much a student with a disability like blindness, a mental illness, or hearing loss can have deducted from their grade.
Some of the effective methods to save on income tax without trying to make any investments have been talked about above. You can save a lot of money by following these tips. Don't do deals with a lot of money.
For example, don't buy an expensive car; if you already have one, use it instead. Keep your expenditures below the limit, and if your earnings exceed the subject tax limit, don't buy expensive things you don't need. Wait until the next economic year to buy those nice things.