As tax season approaches, it's time to start collecting all the necessary documents for tax filing. But in all this, you shouldn't forget about an essential aspect of planning - tax saving. As a responsible citizen, it is your responsibility to pay taxes on time. But at the same time, you can benefit from tax savings on your salary by managing your expenses and investments smartly. After all, you would never want to spend a large portion of your hard-earned money on taxation. Here are some tips that can help you become a sensible payer and smart saver.
Also Read:
Guide to e-Filing or Online Filing your Income Tax Returns
Tips for Saving Money on Taxes
To save money on your tax payments, you can do the following
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Mention your Loan Repayments While Filing Taxes
If you use section 24(b) of the Income Tax Act, you can take advantage of loan interest payments. How? It'll reduce your taxable income, and the limit is Rs 2 Lakh for saving taxes under this section.
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Interest Amount on Savings Accounts
On your savings, you can save on interest earnings up to Rs 10,000. This amount is generally exempt from income tax, which is taken into account as per all your savings accounts combined. However, senior citizens can avail of a higher cap of Rs 50,000 under section 80 TTB of the Income Tax Act (ITA).
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NRE Account Holders
If you are an Indian citizen residing outside India, your interest on your deposits is tax-free, both on the accumulating and fixed deposit amounts.
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Insurance Policies
The maturity amount or bonus received from a life insurance policy is completely exempt from income tax under Section 10 as long as you pay your premium. The exact percentage depends on the policy date (when it was purchased). It also covers a person with a disability or disease listed under Sections 80U or 80DDB.
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Education Expenses
Scholarships awarded to deserving students to cover educational expenses are exempt from income tax under Section 10(16) of the Income Tax Act. Plus, if you have taken a loan to finance higher education, the same will help you save taxes on the interest amount. Under Section 80E of the ITA, 1961, you can claim this deduction.
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Employees’ Provident Fund (EPF)
Being salaried comes with the perks of several government investment policies, and one of them is EPF. This retirement savings scheme is mandatory for employers, as they have to contribute a certain percentage of employees’ basic salary and dearness allowance to the EPF account. And the good thing is that employees can also contribute a part of their salary voluntarily. The tax saving options for salaried here are on the contributions made to the EPF account. Under Section 80C of the Income Tax Act, 1961 employees can withdraw the accumulated EPF balance tax-free.
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Equity Linked Savings Scheme (ELSS)
This is a type of mutual fund that salaried can invest in. It primarily involves equities and makes ways to save tax for salaried under Section 80C of the Income Tax Act, 1961. Under this, an individual can invest up to Rs 1.5 Lakh and avail of a tax deduction on the same. ELSS has a lock-in period of three years, which is the shortest among all tax-saving investment options.
Also Read:
Proper Guide to Tax Benefits on Personal Loan
How Hero FinCorp Personal Loans Save Your Taxes?
Hero FinCorp Personal Loans do not directly save your taxes, as Personal Loans are not tax deductible. However, there are some indirect ways in which we can help you save taxes -
Using a Personal Loan to Make Down Payment on a House
While buying a house, exhausting your savings completely is not a great idea. To avoid this, our Personal Loans get you instant funds. This way you can make your down payment and save your necessary savings for other expenses.
Before you move forward to take a loan regarding a down payment, evaluate your overall financial situation. It will ensure that you do not fall into a financial mess. That being said, if you do decide to use an instant Personal Loan for salaried individuals, you will be able to deduct the interest paid on that loan from your taxes. To be eligible for this deduction, the loan must be taken out for the purpose of acquiring the property, and the interest deduction is subject to certain limitations and restrictions as per section 24(b) ITA, 1961.
When You make Home Improvements with Personal Loans
If you opt for a Personal Loan for a house renovation, you may be eligible for a tax benefit on the interest you pay. Under section 24, you can claim a deduction of up to Rs 30,000 per year for the interest component of the loan. This deduction falls within the overall limit of Rs 2 Lakh, which is available for interest payments on self-occupied homes. By claiming this deduction, you could save up to Rs 10,300 on your taxes.
It's important to note that the tax implications of Personal Loans can be complex, and it's always a good idea to know their tax benefits before deciding how to use a Personal Loan.
