Paying your taxes honestly is the duty and responsibility of every citizen of India. The amount you pay as your Income tax goes into building the infrastructure of the country and boosting the economy. You must make it a point to file your income tax returns on time and pay your taxation liabilities as soon as possible. But paying taxes honestly does not mean that you can not save money for your future and present requirements. Keeping in mind the needs of every citizen, the government has offered several deductions that can be claimed to reduce your tax liability.
1. How to reduce your Tax Liability
One of the most popular modes of deduction is investment under Section 80C. Section 80C consists of several investments and savings options that help you reduce your tax liability by claiming deductions against the amount invested or paid for an approved purpose. The maximum permissible limit under Sec 80C at present is Rs. 1.50 Lakhs. If you think that only Sec 80C is there to help you reduce your tax burden, then you are wrong. There are several other options that you can avail and save taxes.
Here are the 5 of the most popular tax-saving opportunities that you must be aware of: –
- Mediclaim Premium paid under Sec 80DIn the present times, having a Mediclaim policy is a must. Many Mediclaim policies not only safeguard you against possibly exorbitant hospital bills but also offer reimbursement for the period you are sick. This saves you from unexpected expenses as well as possible loss of income. There is one more benefit of subscribing to a Mediclaim policy, and that is tax rebate.Under Sec 80D, you are eligible for deduction up to Rs. 75,000/- with the following conditions: –
- The insurer must be registered and recognised by IRDA.
- Maximum rebate for a Mediclaim policy for an individual and spouse and kids is Rs. 25,000/-
- An additional rebate of up to Rs. 25,000/- for the premium paid for parents Mediclaim policy. If the parents are senior citizens (more than 60 years of age), the deduction is increased to Rs. 50,000/-
- Rebate of Rs. 5,000/- for expenses on preventive health check-up.
- Interest on education loan under Sec 80EYou can claim a deduction against interest payment for an education loan, which has been taken for higher education, i.e. undergraduate or postgraduate. This rebate is available for up to 8 years from the year you started interest repayments. There is no upper limit on the amount of deduction against interest paid for education loan. Education loan should have been taken from recognised financial institutions. The money should have been used for the education of oneself, spouse, kids or someone under your legal guardianship.
- Donations paid under Sec 80GYou can claim a deduction of up to 100% or 50 %, with or without restriction, of the donations made to funds notified by the Central Government for Section 80G relief purposes. Some of the popular funds exempt under Sec 80G include Prime Minister National Relief Fund, Swachh Bharat Kosh, National defence fund and several others.This deduction is also available if the money has been paid for the renovation of religious structures such as temples, mosques, churches. But the respective religious institute must have been approved by the Central Government for accepting donations under Sec 80G.You need to keep the receipt of the donation safe with you to claim the deduction. Cash payment above Rs. 2,000/- is not eligible for deduction. As the same has been restricted by the Government to prevent its misuse.
- Donations to Political Parties under Sec 80GGCMost political parties collect funds from the general public to finance their operations. All contributions made to political parties are eligible for deduction without any upper ceiling. That means one can claim a deduction for the entire amount paid to the fund of the political party. But to be eligible for the deduction, the amount must have been paid through a payment mode other than cash.
- Interest benefit on housing loans under Section 80EEInterestingly you can get an additional tax deduction on the interest component of your home loan. To be precise, one can claim a deduction of an additional Rs.50,000 (over Section 24) of interest paid towards a home loan. Provided, the loan must not be for more than Rs 35,00,000 and the value of the property must not be more than Rs 50,00,000. Furthermore, the individual must not have any other property registered under his name at the time the loan is sanctioned.
These are five of the most popular modes of deduction under the Income Tax Act which help you save a significant amount of money against your tax liabilities. There are several other options also available for you under different sections. So, you must explore all these options during the financial year to help manage your taxes. Tax evasion is a crime and need not be resorted to when you can legally reduce your tax liability.