How to save income tax in 2021

How to save income tax in 2021 1

You are wondering how to save tax on salary or business income? The tax filing season is here, and it is time to plan your finances prudently so that you can reduce your tax liability. Thanks to the Income Tax Act, 1961, there are various income tax-saving options that you can choose from to lower your tax liability.

save income tax

How to reduce income tax?

Take advantage of Section 80C.

Chapter VI A of the act lists sections that allow tax exemptions from your income. Section 80C is a popular section that will enable you to claim a deduction of up to Rs. 1.5 lakhs by investing in various avenues. Some of these income tax-saving options include the following:

A health insurance plan is a necessity in the face of rising medical costs and has tax benefits. Premiums paid towards health plans qualify for a deduction under Section 80D. The limit is Rs. 25,000, which increases to Rs. 50,000 for senior citizens. Moreover, premiums paid for parents can be claimed as additional deductions up to Rs. 50,000.

Invest in National Pension System

The National Pension System gives distinct tax benefits besides creating a retirement corpus. Investment into the scheme is allowed as a deduction, up to Rs. 1.5 lakhs under Section 80CCD (1). This limit, however, is clubbed with the limit available under Section 80C. However, Section 80CCD (1B) allows an additional deduction of Rs. 50,000 for investments into the National Pension System, giving you additional tax-saving benefits.

Buy your dream house with a home loan.

A home loan taken for your dream house has tax-saving benefits too. The principal paid on loan is an eligible expense under Section 80C up to Rs. 1.5 lakhs. Conversely, the interest paid is allowed as an exemption under Section 24(B). Moreover, if you fulfill the requirements of Section 80 EEA, you can claim an additional deduction of Rs. 1.5 lakhs on home loan interest.

Make the most of other deductions.

Besides Sections 80C, 80CCD, and 80D, other tax-saving sections are available under the act. These are as follows:

Income Tax SectionTax benefit
80TTATax-free interest on savings accounts up to Rs. 10,000
80TTBTax-free interest on deposits for senior citizens up to Rs. 50,000
80GTax deduction on approved donations up to a specified percentage of the donated amount
80GGHRA deduction for rented accommodation for those who do not get HRA benefits from employers
80EEBA tax deduction of up to Rs. 1.5 lakhs on interest paid on a vehicle loan for electric vehicles

A penny saved is a penny earned.

Use these tax-saving provisions to save more and thus see your wealth grow. When it comes to increasing your wealth in the long term, you can also opt for different investment avenues that will fulfill your objective and give the added benefit of saving taxes.

You can choose from Public Provident Fund (PPF), Unit Linked Insurance Plans (ULIPs), Equity Linked Savings Scheme (ELSS), to name a few. However, when making investment decisions, it is always prudent to explore your options through a financial advisor, who can suggest avenues based on your investment goals, horizon, and risk appetite.

Read Previous

The Impact Gadgets Have on People’s Everyday Lives

Read Next

Four Reasons You Don’t Need That New Phone Right Now