For most people, paying income tax at the end of a financial year is a cumbersome task. A majority of the hustle revolves around planning the submission of insurances, rent and other receipts in a way that leads to the lowest possible tax liability.
Income tax planning need not be a cumbersome task when you address each aspect of your income with care. While some of the tax-saving methods are very common, if you are in a higher tax bracket, you can resort to unconventional methods to maximise your savings. Here are the top 7 of them:
Contribute more to National Pension Scheme
If you are a subscriber of NPS, you may claim tax benefit under Sec 80CCD(1) with an overall ceiling of Rs. 1.5 lac under Sec 80 CCE. What you may not know is that you can claim an additional deduction of Rs.50,000 under Section 80CCD(1B) of Income Tax. So, to save taxes, increase your contribution to the national pension scheme.
Deductions for children’s tuition fees
If you are a parent, you can claim a deduction on the amount spent as tuition fees to a school, university, college, or any other institution. In a financial year, the maximum deduction on tuition fee payments that can be claimed together with the deductions for insurance, provident fund, pension, and other investment, is Rs 1.5 lakh. This deduction is available for a maximum of 2 children.
A wedding is a huge occasion in India. The couple receives so many gifts from the guests. Such gifts are exempt from taxation under Section 56(2). Gifts received on your wedding day, whether in the form of a gift, cash, or cheque, are tax-free. This means you can claim tax benefits on the gifts you receive from your friends and relatives.
Route your Investments through Parents
Senior citizens are entitled to special tax benefits. You can re-route your revenue from investments if your parents have a low income. So if you earn Rs.1 lakh in interest, instead of including it in your taxable income for the year, you can transfer the money to them tax-free. You can gift this money to your parents tax-free. They can reinvest it in lucrative senior citizen schemes like a Senior Citizen FD, Senior Citizens’ Savings Scheme, and more.
Money Spent on Donation / Charity
Tax deductions can be claimed for charitable/ donations and philanthropic undertakings. Depending on the purpose, some donations are eligible for a 100% deduction, while others for a 50% deduction. However, you need to keep in mind that only donations made in cash or check-based donations are eligible for deductions.
PS: cash is allowed up to 2000 INR
Expenses for Telephone and Internet
According to Rule 3(7)(ix), telephone reimbursement provided to employees is not taxable. If your office work necessitates the use of a mobile/telephone/internet connection, you are entitled to a full exemption of the billed cost.
Pay for Parents’ Health and Health Insurance
Section 80D allows a taxpayer to claim a deduction of up to 25,000 INR. It is available for paying the health insurance premium for yourself and your family. If you pay the premium of medical insurance for your parents, then you can claim an additional tax deduction u/s 80D.
In addition, if your parents are not covered under any insurance policy, you can still claim a deduction of up to 50,000 for the medical expenses made during the year.
There are many more such unusual ways of saving money. If you want to save more on your taxes, kindly get in touch with our team for further assistance.