Tips to Reduce your Tax

Reducing tax liability legally in India involves utilizing various provisions provided under the Income Tax Act. Here are some tips to help you reduce your tax burden:

Invest in Tax-Saving Instruments: Take advantage of tax-saving investment options such as:

  1. Public Provident Fund (PPF)
  2. Equity Linked Savings Schemes (ELSS)
  3. National Pension System (NPS)
  4. Tax-saving fixed deposits (FDs)
  5. Sukanya Samriddhi Yojana (for girl child)
  6. National Savings Certificate (NSC)
Utilize Section 80C Deductions: Make investments and expenditures eligible for deduction under Section 80C, such as:
  1. Life insurance premiums
  2. Employee Provident Fund (EPF) contributions
  3. Principal repayment of home loan
  4. Tuition fees for children's education
  5. Investments in specified mutual funds and schemes
        • Contribute to NPS (National Pension System): Apart from the deduction under Section 80C, an additional deduction of up to ₹50,000 is available for contributions to the NPS under Section 80CCD(1B).
        • Utilize House Rent Allowance (HRA): If you receive HRA as part of your salary and live in rented accommodation, you can claim HRA exemptions under Section 10(13A) of the Income Tax Act.
        • Claim Home Loan Interest Deduction: If you have taken a home loan, you can
          claim deductions on the interest paid under Section 24 of the Income Tax Act. Additionally, the principal repayment qualifies for deductions under Section 80C.
        • Utilize Deductions for Health Insurance Premiums: Premiums paid for health insurance policies for yourself, spouse, children, and parents are eligible for deductions under Section 80D.
        • Avail Leave Travel Allowance (LTA): If you receive LTA as part of your salary, you can claim exemptions for expenses incurred on travel within India for yourself and your family under Section 10(5) of the Income Tax Act.
        • Invest in Equity Mutual Funds for Long-term Capital Gains: Investments in equity-oriented mutual funds held for more than one year qualify for long-term capital gains tax, which is currently exempt up to ₹1,00,000 per financial year.
        • Gifts to Family Members: You can gift money or assets to your family members (spouse, children, parents, etc.) as there is no tax implication on gifts given to relatives. They can invest or utilize the gifted amount to reduce the overall tax burden.
        • Plan your Capital Gains: If you have capital gains from the sale of assets like property or stocks, consider reinvesting them in specified avenues like capital gain bonds or a new residential property to claim exemptions under Sections 54, 54EC, or 54F of the Income Tax Act.

        If Your Income Rs.12Lakhs, How to get Zero Tax: Watch Now

        It's essential to consult with a tax advisor or financial planner to understand the specific implications and benefits of each tax-saving option based on your financial situation and goals. Additionally, ensure compliance with the latest tax laws and regulations to avoid any penalties or legal issues.