Income Tax News: You must first be aware of your current tax obligation if you are a salaried person making between Rs 5 lakh and Rs 15 lakh in net salary annually. As soon as you determine how much tax you must pay, you must make plans to reduce your tax liability by taking advantage of tax deductions allowed by the applicable Income Tax Act provisions.
Introduction to Tax Reduction Options
You have a few options for reducing your taxes: investing in tax-saving products, making charitable contributions, taking out a mortgage, or requesting a wage restructure from your company. Always remember to start saving money on taxes early—ideally at the start of the fiscal year—to avoid any anxiety or trouble when filing your yearly income tax return (ITR).
Income Tax Calculation Basics
Your yearly income is used by the income tax department to calculate your tax liability. According to the tax slabs, a person under 60 years old who earns between Rs 2.5 lakh and Rs 5 lakh a year falls under the 5% tax slab. For people generating an annual income between Rs 5 lakh and Rs 10 lakh, the 20% tax slab is applicable, while the 30% tax slab is applicable for those earning more than Rs 10 lakh. It’s important to keep in mind that there is an additional 4% cess charged for health and education. Up to Rs 5 lakh in tax rebates are offered by the government to individuals.
Investment in tax saving options
The best method to reduce your taxes is to invest your hard-earned money in a variety of tax-saving options. Under Section 80C of the Income Tax Act, you are eligible for tax deductions of up to Rs 1.5 lakh. One option is to invest in:-
- Employee Provident Fund
This is a plan for salaried workers’ retirement benefits. In this case, the employer deducts 12% of both the basic wage and the Dearness Allowance (DA). After that, the money is placed in provident fund programmes approved by the government.
- Public Provident Fund
These investments are supported by the government and have a minimum lock-in period of 15 years. After 7 years, you can take a partial withdrawal of your money and receive interest of about 8%.
- Equity Linked Savings Scheme
These mutual fund schemes that save taxes also offer strong market-linked returns, which is a double benefit. These have a three-year minimum lock-in duration.
- Sukanya Samriddhi Account
A maximum of Rs 1.5 lakh can be invested in this government-backed initiative each year. If you are a parent of a girl child, you can open an account in her name and receive up to 8.5% in interest.
- Tax Saving Fixed Deposit
These have a minimum lock-in term of five years and are comparable to ordinary fixed deposits. Interest payments are available in the range of 7% and 9%.
- National Saving Certificate
These have a five-year minimum lock-in period. An yearly compound interest payment of up to 8% is made.
- National Pension Scheme
This government-run social security programme offers retirement benefits to workers in the public, private, and unorganised sectors. Tier I and Tier II accounts are provided for. The former is an account that must be opened and only permits withdrawals after retirement.
Tax Benefits of Charitable Donations
Donating to charities is another way to save taxes. Donations can be made to a number of relief funds, such as the PM Relief Fund, the Drug Abuse Control Fund, the Clean Ganges Fund, or you can voluntarily contribute to reputable NGOs. Section 80G of the Income Tax Act exempts all of these donations from taxation.
Tax Benefits of Home Loan
You may be able to save taxes by taking out a home loan, as you may not be aware. Making payments on your house loan, including principle and interest, is tax-free under Section 80C of the Income Tax Act.
Negotiating Tax-Saving Provisions with Your Employer
You have the right to ask your employer to adjust your pay to include tax-saving provisions. House Rent Allowance (HRA), transportation, personality development, medical care, phone, uniform, and workplace entertainment are a few examples of these benefits. Moreover, you are eligible to claim tax exemptions twice every four years on your Leave Travel Allowance (LTA).
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