The tax system is complex, and many of us do not properly understand the entire taxation system. As a result, many of us develop an aversion towards tax. For example, if your income does not exceed 2,50,000, then you are saved from paying tax; however, if your yearly income is more than 2,50,000 then it is your duty to pay tax. However, by doing some smart investments, you can pay minimum tax despite earning more.
If you are still wondering how to save tax or the best tax-saving ways, then read the entire write-up to gain some knowledge.
Some Smart Ways of Saving Tax
Buying a house on loan is a prudent investment decision as it helps you to save tax to a considerable extent. Home loan interest has a tax deduction of up to two lakhs per annum. Further on the principal amount, you can avail of tax redemption of 1.5 lakhs per annum. Thus buying a house on loan is one of the best tax saving options.
You can consider keeping some amount of money in your savings account as the interest on a savings account is tax-free up to 10000 per year under section 80TTA. This amount exceeds up to 50,000 for senior citizens.
If you are a benevolent person, congrats, as you can save tax by making some donations. The NGOs where you want to donate must have an 80G certificate. You can enjoy a tax exemption limit of 50 percent of the donated amount and 10 percent of your adjusted total income.
Health Insurance Premiums:
If you are looking for smart tax-saving ways, then you can invest in a good health insurance. You can get a tax exemption of up to 25000 in the health insurance premiums. For senior citizens, the amount is up to 50000.
Tax Saving FD and ELSS Funds:
Tax savings FD can provide a tax exemption of 1.5 lakhs under 80C. ELSS funds are mutual funds where 80 percent of your assets get invested in equity shares, and they have a lock-in period of three years. Therefore, you can enjoy long-term capital gains of 10 percent on ELSS.
Are you looking for a good tax-saving option? Then, putting your hard earn money in the Public Provident Fund can be a smart choice. PPF has a locking period of fifteen years, and here you can enjoy a tax-free return of eight percent.
NSC has a locking of five years, and here you can get a fixed rate of interest of 8%. NSC gives you tax-free returns as well
If you have invested in a Life insurance Certificate, then the premium will be exempted from tax up to 1.5 lakhs
Payment of Tuition Fees:
For tuition fees of your children, you can enjoy a tax-free return of 1.5 lakhs per annum
Under the Employee Provident fund scheme, 12% is deducted for EPF. EPF has a tax limit of 1.5 lakhs
Senior Citizens Savings Scheme:
This scheme is available to people aged over sixty years. Here you can enjoy a tax deduction of up to 1.5 lakhs and an interest of 8.5 %, which is tax-free.
Sukanya Samriddi Yojana:
If you are parents of a girl child below the age of 10, then you can avail of this scheme. This account has a tenure of 21 years until the girl marries after 18. Also, this account has 8.5 tax-free interests.
Thus, save taxes in the above ways and manage your money in a better way.