Saving your income from tax isn’t really a herculean task. With careful tax planning and a bit of effort, you can easily reduce your tax outgo for the year. Here are 7 of the most easy ways to help you save on your taxes and up your income.
1. Open a savings account
The interest you receive on your savings bank account is considered as your income and is therefore taxable. However, you can claim exemption on it upto Rs.10,000 received as interest on your savings account deposits. Section 80TTA of the Income Tax Act offers such tax deductions. The savings account can be held in any financial institution – like banks, co-operative society and post offices.
Do note, this deduction is not applicable to the interest you receive on your FDs/ time deposit or term deposit.
2. Medical expenses and preventive health check-up
Medical expenses are part of every person’s life. Much to your relief, you not only get tax benefits on medical insurances, but also on any money spent towards preventive health checkups. You can get deduction up to Rs. 60,000 under section 80D of the Income Tax Act. This deduction on healthcare expenses are for your family which includes your spouse, your dependent children, and dependent parents. Just make sure not to pay your premiums in cash.
The Sukanya Samriddhi Yojana (SSY) is a small deposit scheme for girl children and her financial needs, launched as a part of the ‘Beti Bachao Beti Padhao’ campaign. It allows EEE (exempt-exempt-exempt) tax exemption under Section 80C of the Income Tax.
This means that the following segments of investment would be completely free from income tax:
– The Final Proceed Amount
– Interest accrued to the contributions
– The investments that you do within a fiscal year
A Sukanya Samriddhi Account can be opened any time after the birth of a girl till she turns 10, with a minimum deposit of Rs 1,000. A maximum of Rs 1.5 lakh can be deposited during the ongoing financial year. The account will remain operative for 21 years from the date of its opening or until the marriage of the girl after she turns 18.
4. Saving tax using Mutual Funds
An Equity Linked Savings Scheme (ELSS) allows you to save tax and at the same time, benefit from investing in equity markets. You can save tax up to Rs 1.50 lakh by investing in an equity-linked savings scheme (ELSS) under Section 80C of the Income Tax Act.
Money can be invested in small amounts, say monthly, to save tax and increase wealth over a period of time through a Systematic Investment Plan (SIP). Moreover, the scheme has a 3-year lock-in period which is one of the shortest periods for tax saving investment.
The SBI Magnum Tax Gain scheme from SBI Mutual Fund, ABSL Tax Relief 96 from Aditya Birla Mutual Fund and Reliance Tax Saver Fund from Reliance Mutual Fund are some popular ELSS schemes.
5. Other daily expenses
This is a method which can help you save money from being taxed with little or no effort. There are several common expenses that we incur without knowing that they can be reduced from our taxable income. e.g., school tuition fees (Section 80C), the interest we pay on our education loan (Section 80E), medical insurance premium (Section 80D), the principal and interest we pay on home loan (Section 80EE), etc.
All these expenses are necessary, and they also give us an opportunity to legally save some tax on our income.
6. Enhanced tax benefit on gratuity
Gratuity is paid by an employer in appreciation of past services of an employee. Earlier, the gratuity received on retirement, becoming incapacitated, on termination, or any gratuity received by the widow/children/dependents of the deceased employee was given a tax exemption up to Rs 10,00,000. But as per the recent changes in the Gratuity Act 1972, this exemption will be enhanced to Rs 20,00,000. So, taxpayers who are going to retire or receive gratuity, starting 1st April 2018, will be able to claim a higher exemption.
7. Declare your losses in tax return to save tax in future
Income Tax law allows you to set off losses in one year against gains in another year. Also, if you have incurred only losses this year (and therefore no profits), you can show this loss (both short and long term) in your tax returns and carry it forward to set it off against any long-term capital gains (LTCG) for the next 8 years.
Start using these tax saving methods today .