It is quite a known fact that the Indian tax system is slightly complex. Every salaried individual or entrepreneur is always on the lookout for different ways to reduce the amount paid as direct taxes. Since the whole process is very tedious the difference was can get overwhelming at times.
The total income of an individual or an enterprise above a certain slab of income in one financial year attracts income tax. The government of India has enacted Income Tax Act in the year 1961. It pertains to imposition, collection, recovery, and administration of this process. The act also has some sections namely section 80C, 80D, and 80G in it which help the taxpayers to save their taxes.
What is Income Tax?
Income Tax is a fraction of one’s income that needs to be paid to the government as a tax. The government of India collects taxes for every financial year i.e. 1st of April to 31st of March of the following year.
The Income Tax Act of 1961 has few sections that deal with saving income tax.
Section 80C: This section allows a deduction to your total taxable income of one financial year. Ass per this section, the taxpayers can avail deduction benefits in all forms of investments or contributions towards financial products.
Section 80D: As per this section in the Income Tax Act 1961 the taxpayers can claim deduction up to 1 lakh by investing in medical insurance premiums.
Section 80G: This section quotes that charitable contributions can also be claimed for tax deductions. Hence the taxpayers who contribute for social causes can avail reduction in the amount paid as income tax.
Tips to Save Income Tax
The complex tax system and the jargon in the legislation of income tax can be very overwhelming for a layman. So here are few tips one can keep in mind to save the amount paid as income tax.
Income tax can be saved if the taxpayer plans his or her home loan well in advance and wisely. In accordance with section 80C of the Income Tax Act, the limit for the principal amount is 1.5 lakh, and for the interest amount, the limit is 2 lakhs. Income tax can be saved through a saving account interest as well. The interest gained through this account up to 10,000 is exempted from income tax. Income tax is not levied on insurance premiums if the amount does not exceed 20% of the sum insured. This is applicable for policies that are taken before 1st April 2012 and for the ones taken after 1st April 2012 the percentage dropped to 15%. The entire amount received as a scholarship by a public or a private entity is exempted from income tax. The amount received as a long-term capital gain is taxed at only 10% if it is more than 1 lakh.
All these and many more tax deduction benefits can be availed by the taxpayers if he or she has chosen the tax benefit instrument with complete knowledge. Important factors like returns, lock-in period, liquidity are crucial factors Hence the taxpayers are advised to go through the various section of the income tax act thoroughly before going in with one tax benefit instrument.