32 different ways to save income tax legally in India

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Below are several ways you can save taxes for 2019-20 or 2020-2021. These are divided into three categories and can be used to save tax for salaried employees or business-pursuing individuals. The following points will help you save income tax or how to avoid tax in India that is higher than 80C. These points may have subtle differences based on the annual revisions.


Plan your tax through a Home Loan:

1. Tax deduction in the case of a home loan:
Tax savings can be achieved if you plan your home loan carefully according to section 80C. The limit for principal amount is Rs. 1.5 lakhs according to section 80C, and for the interest amount the limit is Rs. 2 lakhs according to section 24.
Tax Saving Options Under Sections 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80CCG, 80G
Below is a list with tax-saving options that can be used for various sections.
2. Income through Savings Account Interest:
The tax exemption for interest on savings accounts is Rs. 10000. 10000 This sum is the total of all savings bank accounts. This limit is Rs. 50000 for senior citizens
3. NRE Account Interest Income:
Indian non-residents can open NRE accounts in India. They get interest on both the accumulated amount as well as the fixed deposit amount. This amount isn't taxable due to the generosity of the Indian government toward NRIs. The interest amount is called tax-free income.
4. Life Insurance Policy Money:
A life insurance policy may allow you to receive money upon maturity or when you have received the claim amount. If the premium is less than 20% of the insured sum, the amount received is exempted from tax This applies to policies that were issued prior to April 2012. This percentage is lower for policies issued after April 2012.
5. Scholarships for Education:
This amount is exempt from tax under Section 10(16). This scenario is free from tax because it does not limit the amount that was received through private or public scholarship.
6. The amount received from Sold Equity Mutual Funds or Sold Shares:
The amount of long-term capital gains greater than Rs. A 10% tax will be applied if the long-term capital gain exceeds Rs. 1 lakh
7. Dividends received on shares or equity mutual funds:
This amount is exempt from tax
8. Wedding Gift:
Weddings are a big event for everyone, but especially for the couple getting married. It is a huge event in India where the groom and bride are lavished with gifts. These gifts are exempt from tax under Section 56(2). Gifts received upon marriage are exempt from tax, regardless of whether they are cash, cheques, or gifts. These gifts may be given by your family or friends.
9. Agricultural income:
Income from agricultural land is exempted of tax for any type. This income could be related to income from agricultural land, rent from land or revenue from land. It also includes the amount generated by agriculture products and the amount through a farming building.
10. HUF and Additional Income:
You can save money on tax if you earn secondary income to your salary. A secondary income can be earned by freelancing, for example. For secondary income, you will need to open a separate HUF bank account. You can then invest the amount in section 80C for tax benefits.
11. Amount Received Through Inheritance:
India does not tax inheritances in the form of Wills. The amount that you receive in the form of a Will is not subject to Indian tax.
12. Section 80C Provisions:
The government of India has made it possible to invest Rs. 1,50,000 in order to encourage savings. Section 80C of Income Tax Act provides for a maximum investment of Rs. 1,50,000 You can save money on tax and make investments that will secure your future. Here are some popular options for saving tax under section 80C.
• Public Provident Fund
• National Pension Scheme
• Premium paid for life insurance policy
• Certificate of National Savings
• Equity Linked Savings Scheme
• Principal amount of a home loan
• Fixed deposit for five years
• Sukanya Samriddhi Account
• Tuition fees for children
13. Additional Contribution to the National Pension Scheme:
Contributions to the National Pension Scheme are usually covered by Section 80C. This section has a limit of Rs. 150000 You can also choose to invest Rs. You can also invest Rs. 50000 in the National Pension Scheme. This amount is exempt from tax.
14. Amount from Provident Funds:
The interest earned on the provident funds is not taxable. You must wait five years before withdrawing the amount from your Provident Fund.
15. Student Loans:
This is covered by section 80E under the Income Tax Act. The interest paid on an education loan isn't taxable. This category does not have a limit.
16. Premium for Health Insurance:
Section 80D is the section that deals with tax deductions for health insurance. The tax deduction for a portion of the premium paid for health insurance is limited to the amount that was used as a premium. This amount changes on an annual basis. You can save more tax by paying premiums for senior citizens' health insurance.
17. Treatment of Disabled Dependents:
These deductions are part of Section 80DD. Fixed deductions of Rs. Fixed deductions of Rs. 125000 is available for people with more than 80% disability. These expenses must be used to treat a disease, training or rehabilitation. To be eligible for this deduction, you will need to provide a certificate of disability.
18. Treatment costs for specific diseases:
This is a part of Section 80DDB. For expenses incurred to treat specific diseases like Dementia and Cancer, Aids, and others, tax benefits may be available. Tax deductions of up to Rs. 40000 are available for such diseases. These tax deductions are up to Rs. If the expenses are for a senior citizen dependent, the amount will be Rs. 1 lakh
19. Spend money on charity:
Donating money to charity can help you save tax. This is allowed under Section 80G. You will need to obtain a certificate from the charity organization in order to claim the benefit.
20. Spending money on donations to political parties:
Spending money on a political party is eligible for tax deductions up to an upper limit. These deductions are part of Section 80GGC. This donation amount is eligible for 100% deduction.
For business persons, tax-saving tips
Here are some tax-saving options that a businessperson can use.
21. Distribution of Profit in Partnership Firm:
If a partnership firm makes profits and the business owners decide to split the profits, no tax will be charged to partners.
22. Expenses Made for Traveling:
To save taxes, business owners can claim expenses incurred for travel as business expenses.
23. Expenses Made for Food:
To save taxes, business owners can claim expenses for food as business expenses.
Salary Individuals: Tax-saving Tips
Here are some tax-saving strategies for salaried workers.
24. Leave Travel Allowance(LTA):
This feature is available to employees for travel expenses of their spouses, children, or parents. Only siblings who are dependent on the salaried employee are eligible. This is covered under section 10(5).
25. HRA as a Part of the Salary:
To be eligible for this feature, you must reside in a rented location and have the receipts. It is covered by Section 10(13).
26. HRA is not a part of your salary:
The tax benefit is available to employees who do not have HRA as a salary. It can be used in one of two ways. One, subtract 10% from your income and then, second, a flat rate at Rs. On a monthly basis, Rs. 5000. These deductions are part of Section 80GG.
27. Amount Received from Gratuity:
Gratuity money is exempted from tax up to a certain limit. Limit Rs. 20 lakhs is the limit for tax-free gratuity. 20 lakhs
28. Coupons for Food:
Meal coupons and food coupons, as they are also known, are not subject to tax. They are not taxable up to Rs. 2600
29. Standard Deduction:
A standard deduction of Rs. 40000. This is the maximum amount.
30. Company Leased Car:
Tax savings can be achieved by leasing a car from the company.
31. Expenses for Telephone and Internet:
Tax benefits can be obtained by using expenses for telephone and internet.
32. Amount Received as per Voluntary Retirement Scheme (VRS):
Many people opt for Voluntary Retirement. They also take a pay out. The Voluntary Retirement Scheme does not allow for taxation beyond Rs. 5 lakhs.

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