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Ten ways to save tax legally

best Top Ten ways to save tax legally

Every year we have to pay taxes on our hard earned money and well, making money is hard. So each of us want to save tax money as much as possible. A careful tax planning throughout the year and timely filing of income tax return can help in this matter. Now a days organizations pay taxes for their employees so be careful in filing your income tax return. Here we are listing top 10 ways you can save tax money legally.baner-copy

If you don’t time it properly, then your tax planning will go to waste.TDS is withdrawn from your salary every month. The TDS is deducted on the basis of your projected tax that particular year. If one doesn’t declare his planned tax saving, investment and expenses of the year timely, the projected tax will be higher. Accordingly, the employer would start deducting the TDS on every month for the first quarter of the financial year. It may happen that when you declare all of your tax saving instruments, it is more time consuming and will be late. So it is best to give a tax declaration at the year beginning.

9. Clubbing and smart planning
Transfer some money to your non-working spouse or minor child and invest the money in a tax-free toolssuch as PPF or ELSS funds, tax free bonds and Ulips.
You can claim a deduction amontof up to 1,500 per child for two children in case of , depositing the investments in the name of minors.

Once your child turns 18, that person is treated as a separate individual for all tax purposes, you can transfer money and the person can enjoy another 2.5 lakh exemption along with all the other deductions and benefits
You can pay rent to your parents and claim HRA benefits.
You can receive gifts from your relatives, friends and family on the occasion of your marriage and it will be tax free.
Any income derived from Agriculture land is tax-free in India.

8.Donate and save tax
Tax can be reduced by donating your money. Some donation will provide you 100% tax saving like donating to a political party, some NGO’s and PM relief fund. Donations can be done to scientific institutions and religious institutions to save tax.

7.Get off capital gains
Salaried people have to give capital gain tax on their investments. Shares will lead to short term capital gain tax while gold and property leads to long term capital gain tax. However, with the capital loss of one investment capital gain can be set off from another investment. But remember only long term capital loss can set off long term capital gain tax and similarly for short term. The capital loss can be carried on for 8 years.so you can save tax on the basis of capital loss.

6.Tax Benefit On Home Loan Interest Payment
As we have already discussed home loan payment has two parts: Interest and Principal. Well Home loan interest payment can save you money separately. The budget 2016 lists Home loan interest payment deduction limit up to Rs.2.5 lakhs. However, the loan amount should be big to avail the maximum benefit. Also the savings can be doubled if you took a joint home loan.

5.Medical Insurance tax savings
Medical insurance expenses come under deduction under 80D and the limit is over and above Rs.1.5 lakhs. You can take health care premium on the behalf of you and your dependents, including parents. Health checkup expenses also comes under this.
Up to Rs 25,000 for the health insurance of yourself and family.
The limit goes up to 30,000, if they are above 60 yrs.age. Health checkups of up to Rs 5,000 is also included in this.

4.Expenses that save tax
Under 1.5 lakh limit deduction, some expenses are also considered.
#Tuition fees (yourself and children)
#Insurance premium
#Home loan EMI has 2 parts: Principal and Interest. Principal part of the home loan is included under 80C deduction.

The sum of above investments and expenses should not exceed Rs. 1.5 lakh.

3.Tax free Allowances (Medical, Travel)
Certain personal allowances are also waived from the tax. For eg.if someone supplies a bill of medical expenses of himself or his dependents, then the amount becomes tax free.so don’t let go of your medical bills. The amount limit however is up to Rs.15000 for a year.
Your employer must offer you tax free leave travel allowance which has following rules:
The limit is 2 times in a period of 4 yrs. Travel should be within India and during the leave period with shortest route first class train ticket and economy class of planes come under this.

2. Save tax on Rent
People usually rent out a house due to their job and if their organization doesn’t provide an accommodation. They are left with no option but to rent a house. However, employers do provide part of your rent as House rent allowance(HRA). However full HRA can’t be used to save tax.
There are conditions and the lowest amount out of the following
Should be deducted from gross income:
#HRA that your employer provides.
#50%salary + DA if you are in Delhi, Mumbai, Kolkata and Chennai. Rest 40% salary+DA
#Actual house rent -10%salary+DA

HRA helps you save tax big time. Also, don’t forget to get monthly house rent receipts from the flat owner as if the rent amount exceeds Rs.1 Lakh for a financial year, lease agreement and copy of PAN card of homeowner is to be produced.
Note: If you are living with your parents, you can also get the tax waived as a renter but proper documents are to be supplied. .

1.Save tax by Investing
Under section 80 C, some investments help you reduce your total taxable amount. The amount of money invested is deducted from total taxable income
However, the maximum amount is 1.5 lakhs that can be deducted from total taxable amount due to investments.
Various schemes eligible under 80 C investments:
#PPF or Public provident fund.
#Equity Linked Saving Scheme (ELSS)
#SukanyaSamriddhi Account
#Tax Saving Fixed Deposit
#National Saving Certificate (NSC)
#Senior Citizen Saving Scheme
#Employee Provident Fund

We hope you find this article informative and helpful.Here we listed top 10 ways to save your tax money legally and we hope you can gain as much tax rebate as possible on your hard earned money.

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