Ways to Save Income Tax in India

09/05/24

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Paying tax is one of the many ways we, as citizens, support the Government of India’s goal of transforming India into a highly developed nation. It is through the payment of tax that we can fund developmental aspects like the construction of roads, schools, and hospitals. One could rightly say that tax is the lifeblood or fuel of development. At the same time, we must examine legal solutions for how to save tax in India. Let us review the many ways tax can be saved effectively. These solutions have two aspects in common: They entail a long-term investment and effectively reduce our taxable income.

Donate to charity

When you donate to charity, you are not only contributing to a meaningful cause but also reducing your taxes. Any money given to approved non-profit organisations can be deducted from your taxable income, up to 10% of your total earnings. So, if you earn Rs. 5 lakhs, you can reduce your taxable income by up to Rs. 50,000 by giving to charity. Do ensure that you are donating to well-known, reputed, and trusted organisations like Bal Raksha Bharat (Save the Children India). This non-governmental organisation, which has been present in India for over 15 years, has a commendable track record of channelling donations towards strategic and highly impactful initiatives that address various developmental aspects for children across the country.

Making tax-saving investments

Any financial advisory on the topic of how to save tax in India will undoubtedly recommend investing in tax-saving instruments, which include mutual funds and fixed deposits. These investments, which bring down one’s taxable income, allow savings of up to Rs. 1.5 lakhs per year from being taxed. In addition, they can also earn a sizeable source of investment-based income. However, one must keep in mind that there are specified periods during which the investment cannot be withdrawn. However, this is an effective and time-tested solution to save on taxes.

Buying a home

Investing in home ownership is another way to enjoy the benefit of personal property while also saving on taxes. First, the money you pay toward your home loan’s principal amount can be deducted from your taxable income up to Rs. 1.5 lakhs per year. Additionally, if you rent out your property, you can deduct interest paid on your remaining home loan amount from that rental income when calculating your taxes due.

Paying health insurance premiums

Nobody likes going to the doctor or hospital. But those medical bills can help you save on taxes. You can claim deductions for health insurance premiums you pay, as well as costs for medical treatment of specified illnesses or disabilities. There are limits to how much you can claim, but every bit of savings helps.

Claiming Leave Travel Allowance

Do you love going on family vacations? Well, those holiday costs can reduce your tax burden! Under the Leave Travel Allowance or LTA benefit, you can get tax exemptions for expenses incurred while travelling within India for vacations. This includes costs for travel, accommodation, and even food up to certain limits. So save those travel receipts.

Loan for buying an Electric Vehicle

Trying to help the environment by driving an electric vehicle? The government wants to reward you for your purchase. Under Section 80EEB, you can claim a tax deduction of Rs. 1.5 lakhs on interest paid toward an electric vehicle loan. This incentive aims to promote greener transport options. So while saving the planet, you also save some tax!

Claiming a double housing deduction

If you have to live in a different city for work while your family remains elsewhere, you may qualify for dual housing benefits! You can claim tax deductions for rent paid on your secondary accommodation near work. And you can also claim home loan interest deductions for the home where your family resides! It’s like getting a valuable tax benefit simply for your work situation.

Handicap Benefits

If you or anyone in your family has certain disabilities, you are eligible for additional tax deductions. These include a deduction of Rs. 75,000 for yourself if you have a disability, as well as additional exemptions for supporting disabled dependents. While having a disability is challenging, at least there is some financial relief available through these tax provisions.

Learn and Save

Are you a good student who loves reading and learning? Then you may be able to convert that passion into tax savings! Any fees paid for your education or books and materials can be claimed as deductions from your taxable income. This includes tuition, admission fees, cost of books and publications, and even expenses on stationery items. Who knew doing your homework could make you richer too?

Some of these additional methods can help you keep even more of your hard-earned money. Just be sure to keep proof and paperwork in order.

Pulkit Arora

Manager-Brand & Communication

“With over 12 years of dedicated experience in the social development sector, I am passionate about championing child rights and community empowerment through innovative communication strategies. As a Digital Marketing Manager for digital Campaigns and Communication with Bal Raksha Bharat (Save the Children), I have honed my expertise in orchestrating impactful campaigns online and fostering partnerships with key stakeholders to drive positive change."