Let’s explore how to save on taxes without investing by taking advantage of tax deductions available for various expenses incurred throughout the year.
As tax season approaches, many individuals look for ways to minimise their tax liabilities. And everybody around you would tell you that to reduce your tax liabilities, you must invest in tax-saving instruments like Public Provident Fund (PPF), National Pension Scheme (NPS) and whatnot!
But we know the real thing. Throughout the year, if we have earned money, we have also spent on various things like child’s school fees, home loan EMIs, etc. So, how would an individual shell out money to invest in these schemes to save taxes?
The good news is that you don’t have to invest to save taxes because you can save taxes while spending too! In this article, we will unveil some of the most exciting and effective ways to save on taxes without investing a single penny!
Home Loan Principal Repayment
We all wish to buy a home we can call our own and create countless cherished memories. Well, that dream of yours can become a reality, and the best part is that you can even take advantage of tax deductions by buying a home!
Under Section 80C, the principal portion of your home loan’s EMIs can be claimed as a deduction up to a maximum of Rs 1.5 lakh per financial year. However, there’s a catch – if you sell the property within five years of obtaining possession, the deduction you claimed earlier will be added back to your income in the year of sale. So, hold onto your beloved home for at least five years before selling it.
Home Loan Interest Payment
After the principal amount, let’s look at the interest you pay to your lender every month as a part of EMI. Under section 24(B) of the Income Tax Act, you can avail of deductions on the interest paid on your home loan. And if you are living in the house you own, you can claim a maximum tax deduction of Rs 2 lakh annually from your gross income.
The government is encouraging you to invest in an asset and save taxes!
Stamp Duty and Registration Fees
After the principal amount and interest payment, how can we miss mentioning the deduction offered on stamp duty and registration fees?
Under section 80C, you can claim a deduction for stamp duty and registration charges but within the overall limit of Rs 1.5 lakh. But remember, you can only claim this deduction in the year these expenses are incurred.
Interest Paid on EV Loan
The Indian government has recently taken steps towards promoting sustainable living. And if you join hands with the government in their motive, you get a reward. The reward is that you will benefit from tax deductions on electric vehicle purchases under Section 80EEB. According to this section, individuals who purchase an electric vehicle on loan can claim deductions on the interest amount paid while paying the loan back. The total tax exemption allowed under this section is up to Rs 1,50,000.
Higher Education Loan
The Indian government also recognises the value of education and aims to make it more accessible. Hence, they have introduced Section 80E of the Income Tax Act 1961, which allows individuals to claim deductions on the interest paid on loans taken for pursuing higher education. This deduction is available on the interest amount paid during the financial year.
As a parent, you would pay fees for your child’s education. But you can also save taxes in the process, as section 80C of the Income Tax Act is here to save the day! Yes, you can claim a deduction on the amount you paid as tuition fees to an educational institution. It’s important to note that not all components of fees are eligible for deduction under Section 80C but only the tuition fees.
So, offer a good education for your child and get a tax deduction.
Preventive Health Check-up
Did you know that taking care of your health can benefit your body and your wallet? Yes, because under Section 80D of the Income Tax Act, if you undergo a preventive health check-up, you can enjoy tax deductions of up to Rs 5,000 per financial year. You can also get tax benefits for preventive health check-ups for your spouse, children and parents.
Lastly, let’s discuss the EPF contribution deducted from your salary. Yes, this is not an expense, but the amount is deducted from your salary every month. So, your contribution to the EPF account is eligible for deduction under Section 80C.
Note that, under section 80C, you can claim a maximum deduction of Rs 1,50,000.
To conclude, saving tax doesn’t always mean investing your hard-earned money. There are plenty of smart ways to save tax. By taking advantage of deductions, you keep more money in your pocket and less in the hands of the tax man.
Start planning your tax saving strategies and watch your savings grow!