The Constitution of India has provisions in the union list in the seventh schedule enabling the Central Government to collect taxes on non-agricultural and agricultural income. The Income Tax Department manages and monitors the implementation of the provisions on collecting taxes. The Income Tax Act of 1961 is responsible for the levying, administration, and collection of income tax in the country of India. However, despite the levy of income tax, the act has provisions that help people save money on income tax. These are etched out in Sec 80 especially Sec 80C, Sec 80D, and Sec 80 EE. Hence there are a number of ways in which income tax can be saved.
Ways of Saving Income Tax
- Life Insurance: People need to procure different types of insurances like ULIPs, term insurance, and endowment policies to get a tax deduction which goes up to Rs 1.5 Lakh. But the annual premium has to be ten percent of the insurance coverage amount.
- Medical Insurance: Healthcare insurances are very common in the present world because of the spread of illness and diseases. The Govt with the help of legal provisions under Sec 80D has facilitated the tax deductions for payment of premiums for medical insurance. Various amounts are exempted which depends on the age of the insurer.
- Public Provident Fund: This is a government savings scheme that has a long duration of 15 years. The interest in the public provident fund is free of taxes. This is advantageous for people who are employed and the employee usually facilitates to contribute to the Fund.
- National Pension Scheme: Many govt schemes give benefits including the NPS. The provisions can be found in Sec80CCD which states that tax deduction can be made for contribution up to Rs 1.5 lakh.
- Other Govt Schemes: Schemes such as Senior Citizen Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY), are exempted from tax deductions. This is provided in the Sec 80C of the Income Tax Act.
- Donation to Charity: Tax will be waivered for donations made to charitable organizations in the country of India. This provision is etched out in Sec 80G of The Income Tax Act 1961. Donations made through Cheque or bank transfer are eligible for a full tax waiver, whereas partial exemption of taxes can be availed for cash donations.
- Payment of Rent: Sec 10 (13A) of ITA provides for tax exemptions for House Rent Allowance, depending upon certain specific factors. One of those is that the HRA should be mentioned as a component in the salary sheet. But if it is not included in the salary, then the individual can avail of tax benefits under Sec 80GG of ITA for house rent.
- Repayment of Home Loans: The tax deduction takes place while returning the principal amount of the home loan. The tax deduction goes up to Rs 1.5 lack yearly.
- Savings Account: The interest incurred in the savings account is made tax free till Rs 10,000. The limit is higher for senior citizens. This is provided under Sec 80TTA and Sec 80TTB of ITA.