How to reduce taxable income
Did you just use the new tax regime calculator to see how the latest finance bill affected your tax liability? If you are planning to reduce your taxable income, it is important to learn about the most important ways to accomplish this. Even though it’s hard to do, there are some simple investments you can make to lower your tax bill. In this article, we will provide you with all the information you need in order to reduce your taxable income so that you can enjoy lower taxes at the end of the year.
- Invest in health insurance
In case of an accident or illness, health insurance covers the cost of hospitalisation and medical treatment as well as compensation for loss of income while recovering from an illness or injury. Health insurance can also pay for medical expenses not covered under the medical insurance policy; such as dental treatment, eye care and even funeral expenses if you pass away due to illness or accident. You can buy a health insurance policy either through your employer or directly from a private insurer.
- Invest in employee provident fund
Once you are employed, you need to contribute a certain percentage of your salary to the EPF account. The amount you need to deposit depends on your age and income level. The money deposited in the EPF account will be used for pension and medical benefits after retirement.
Employee provident fund (EPF) is a tax-saving investment plan that gives you a chance to save for your retirement and children’s education. It is compulsory for salaried employees to contribute 12% of their salary towards EPF, which is deposited in the EPF scheme of your employer. The interest earned on your EPF contribution is exempted from tax if the contribution is upto Rs. 2.5 lakhs.
- Contribute to charity
You can claim a tax credit for contributions made to registered charities. The amount of money you can contribute is based on how much you earn, so it’s useful if you’re trying to reduce taxable income. If you have earn a lot, consider donating some of it to charity. You can deduct the amount you donated from your taxable income. If you are eligible for tax credits and deductions, then the amount that you donate will be subtracted from your total income and shown on your tax return as a deduction. Of the total donated amount you can claim deductions for upto 50% to 100%. To figure out the right amount you should contribute to charity for decreasing your tax liability, use a salary tax calculator India. This will give an idea of your current taxable income and then based on how much you want to decrease this amount you can contribute to charity.
- Claim deduction on your home loan interest
If you have taken a home loan on which you paid interest during the year, then claiming deduction is easy if you make monthly payments on time and meet other conditions mentioned in the official statement of income tax deducted at source . The amount can be claimed as an expense and deducted from your taxable income. You can claim this deduction under section 24 of the Income Tax act. As per this section you can claim a deduction of upto Rs. 2 lakhs.
- Invest in National Pension Scheme
As per the government, the National Pension Scheme is an investment plan that helps you build your retirement fund. To be a part of this scheme all employees can contribute to it by paying a small amount every month. By investing in this scheme you can decrease your taxable income by Rs 1.5 lakh.
- Savings account
You can also claim tax exemption on the interest you get on the deposits in the savings account. This tax exemptions is available in accordance with section 80TTA and the maximum amount for which you can get exemption is Rs 10,000. This limit is Rs. 50,000 under section 80TTB for the senior citizens.