As the tax season approaches, many people seek ways to reduce their tax liabilities. Nearly everyone around you will suggest investing in tax-saving instruments like the Public Provident Fund (PPF), National Pension Scheme (NPS), etc., to reduce tax liabilities.
But the truth is, we all know it. Throughout the year, whatever money we have earned, we have also spent it on various things like our child’s school fees, home loan EMIs, and so on. In such a scenario, how can one advise investing in these schemes to save tax?
How to save income tax without investing?
We bring you good news. You don’t need to invest to save tax. Yes, because along with spending, you can also save tax. In this article, we will explore some interesting and effective ways to save tax without investing a single penny.
Let’s get started.
01 - Home Loan Principal Repayment
Owning your own home is everyone’s dream. Your dream can come true, and the best part is that you can also avail the benefit of tax deduction by buying a house.
Under Section 80C, you can claim a deduction of up to Rs 1.5 lakh on the principal part of your home loan EMI every financial year.
However, there’s a catch. If you sell the property within five years of acquiring ownership, the deduction claimed earlier will be added back to your income in the year of sale. So, stay invested in your home for at least five years before selling it.
02 - Home Loan Interest Payment
After paying the principal amount, let’s focus on the interest paid as part of the EMI every month. Under Section 24(B) of the Income Tax Act, you can avail a deduction on the interest paid on your home loan.
If you are living in your own house, you can claim a deduction of up to Rs 2 lakh annually from your gross income.
The government’s intention behind this is to encourage investment in property and save taxes.
03 - House Rent Allowance (HRA)
Do you work and live in a rented house? If yes, then you must be receiving House Rent Allowance (HRA) as a part of your salary. It means you can claim tax exemption on HRA under the Income Tax Act. According to Section 10, you can fully or partially claim exemption on the HRA allowance, depending on certain conditions.
You can calculate your HRA entitlement as follows:
Actual HRA received by you
Rent paid minus 10% of your salary (Basic + DA)
50% of salary (Basic + DA) if living in metro cities, or 40% if living in non-metro cities
The lowest of these three amounts will be eligible for tax exemption.
Additionally, if you live with your parents and receive HRA from your company, you can still avail the exemption benefit. Just pay them rent every month.
04 - Stamp Duty and Registration Charges
After paying the principal amount and interest, let’s discuss how you can save on the stamp duty and registration charges.
Under Section 80C, you can claim a deduction for stamp duty and registration charges, but this is within the overall limit of Rs 1.5 lakh. Remember, you can claim this deduction only in the year in which these expenses are incurred.
05 - Interest Payment on EV Loan
The Indian government has recently taken several steps to promote sustainable living. If you support this cause, you are rewarded.
You will be eligible for a tax deduction under Section 80EEB on the purchase of an electric vehicle.
Under this provision, individuals purchasing electric vehicles can claim a deduction on the interest paid while repaying the loan. You can avail tax benefits of up to Rs 1,50,000 in this segment.
06 - Higher Education Loan
The Indian government values education and aims to reach to as many people as possible. Therefore, it has introduced Section 80E of the Income Tax Act. Under this, people can claim a deduction on the interest paid on loans taken for higher education.
This deduction is available on the interest paid during the financial year.
07 - Tuition Fees
We all know that the cost of children’s education is increasing day by day. A significant portion of income goes into paying tuition fees. But you can also save tax in this process.
Under Section 80C of the Income Tax Act, you can claim tax deduction on the amount paid as tuition fees to educational institutions.
It is essential to note that all components of the fee are not eligible for deduction under Section 80C; only tuition fees qualify.
So, provide your child with a good education and get tax benefits.
08 - Preventive Health Checkup
You can benefit your body and your wallet by taking care of your health. Yes, under Section 80D of the Income Tax Act, if you undergo a preventive health checkup, you can claim a tax deduction of up to Rs 5,000 annually.
You can also avail tax benefits for preventive health checkups for your spouse, children, and parents.
09 - EPF Contribution
Lastly, let’s discuss the EPF contribution deducted from your salary. It’s not an expense; rather, a certain amount is deducted from your salary every month. Your contribution to the EPF account is eligible for tax deduction under Section 80C.
Note that under Section 80C, you can claim a maximum tax deduction of Rs 1,50,000.
10 - Contribution to Life Insurance Premium
If you want to provide security to your family and save tax at the same time, a life insurance policy is an excellent option for you. Under Section 80C, you can claim a deduction of up to Rs 1,50,000 for contributing to any life insurance policy for your spouse and children.
This plan gives you dual benefits:
Family security: In an unfortunate event, your family receives financial assistance.
Tax saving: You can reduce your taxable income by contributing to your family’s life insurance policy.
Conclusion
Saving tax doesn’t always mean investing your hard-earned money. There are many smart ways to save tax. By availing deductions, you can keep more money in your pocket and less in the hands of the taxman.
So, start planning your tax-saving strategies today and witness your savings grow.
