Every year, as the tax season approaches, we all start thinking about ways to save on income tax. It is no surprise that we all want to reduce our tax burden and save as much money as possible. The good news is that there are various ways through which you can save income tax worth Rs 5 lakh. Yes, you read that right! You can save up to Rs 5 lakh on your income tax. Let’s take a look at some of these ways and see how you can benefit from them.
1. Invest in Tax-saving Schemes
One of the most common ways to save income tax is by investing in tax-saving schemes. These schemes are specifically designed to provide tax benefits to individuals. Some popular tax-saving schemes include Public Provident Fund (PPF), National Savings Certificate (NSC), and Equity-Linked Saving Scheme (ELSS). By investing in these schemes, you can avail deductions up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Not only will these investments help you save tax, but they also offer attractive returns, making them a win-win situation for you.
2. Purchase Health Insurance
Health is wealth, and it is essential to have a good health insurance policy in place to safeguard yourself and your family. The premium paid towards health insurance is eligible for tax benefits under Section 80D of the Income Tax Act. You can claim a maximum deduction of Rs 25,000 for yourself, your spouse, and your children. Additionally, if you have parents who are senior citizens, you can claim an additional deduction of Rs 50,000 for their health insurance premium. This way, you can not only save tax but also ensure the well-being of your loved ones.
3. Home Loan Interest
If you have taken a home loan, you can avail tax benefits on the interest paid towards it. Under Section 24 of the Income Tax Act, you can claim a deduction of up to Rs 2 lakh on the interest paid towards your home loan. In case you have a joint home loan with your spouse, both of you can avail this benefit, which can bring your tax liability down significantly. This is a great way to save on income tax while also fulfilling your dream of owning a home.
4. Donations to Charitable Institutions
Donating to charitable institutions not only helps those in need but also offers tax benefits. As per Section 80G of the Income Tax Act, donations made to specified charitable institutions are eligible for tax deductions. The amount of deduction varies from 50% to 100% depending on the institution and the type of donation. By contributing to a good cause, you not only save tax but also make a positive impact on society.
5. National Pension System (NPS)
NPS is a government-backed pension scheme that offers tax benefits to individuals. Under Section 80CCD (1B) of the Income Tax Act, you can claim a deduction of up to Rs 50,000 for contributions made towards NPS. This is in addition to the Rs 1.5 lakh deduction under Section 80C. By investing in NPS, you not only save tax but also secure your retirement by building a corpus for your future.
Apart from these, there are various other ways through which you can save on income tax. Some of them include investing in tax-saving fixed deposits, education loans, and buying an electric vehicle. The key is to plan your investments and expenses in a way that maximizes your tax benefits. It is always advisable to consult a financial advisor who can guide you in making the right investments and help you save on taxes.
In conclusion, saving income tax worth Rs 5 lakh is not an impossible task. With proper planning and knowledge of tax-saving options, you can reduce your tax liability significantly. Moreover, investing in these schemes not only helps you save tax but also helps you build a strong financial portfolio for the future. So, let us all take a step towards a better financial future by utilizing these tax-saving options and saving on income tax.
