How to Save Your Taxable Income?
Paying taxes is a vital civic duty for every citizen. Direct and indirect taxes that you pay to the government, use for the development, infrastructure, medicines, education and housing purpose. So, basically, the tax levy on your income ultimately comes to you in the form of good amenities. At times it is more like a burden to your pocket but in the end, it is for your good. However, to reduce the tax burden the Indian government offers some relief through various investment schemes under the Income Tax Act 1961. Under these schemes, you can save your taxable income. But, before you read about the ways to lessen your taxable liability, let’s understand what taxable income is all about?
What is Taxable Income?
It is the amount of your income that is used to calculate how much tax you have to pay to the government in a year. It includes income received as a salary, fees, commission, allowances, rent, profit, sales, bonus, tips, dividend, sale of assets, and gifts. Some part of your taxable income is entitled to taxation, whereas some get an exemption.
How to Calculate Taxable Income?
Taxable Income= Adjusted Gross Income (AGI) - Deduction or exemption (HRA, LTA, premium, etc.). This amount of income used to calculate how much tax you owe to the government in a respective year.
Tips to Lower Your Taxable Income
Under section 80 of the Income Tax Act, there are different saving options that you can opt for to limit your taxes. Here you go!
1.Mediclaim under Section 80D
Mediclaim 80D is the most popular way to reduce your tax burden. Premium paid against the best health insurance policy for self, dependent parents, spouse, and children exempt from tax. You can claim Rs.25,000 for individual and family health insurance up to Rs.30,000 for senior citizens per year. If you have made a lump-sum premium payment in a single year for a health policy that is valid for more than one year, you can claim a deduction up to Rs.50,000. You can avail tax deduction on annual health checkups up to Rs.5000 per year as well.
2.Education Loan under Section 80E
Education loan taken for self, spouse, or children studies is another way to escape from heavy tax under section 80 E. You can reduce your taxable income up to the interest paid against the education loan. However, you can avail of this tax only when you are a full-time employee, or your loan is approved by a financial institution.
3.National Pension System (NPS) under Section 80CCD
Investment in NPS is also one of the good ways to save your hard-earned money. Section 80CCD entails that you can reduce your taxable income by ₹1.5 lakh by investing in the National Pension System. However, there are some terms and conditions that are applied according to the amount invested in the pension schemes.
4.House Rent Allowance under Section 10(13A)
You will be glad to know that HRA, the part of your salary, also helps you to lower your taxable income. However, you can claim it when you are living with your parents and contributing to daily household expenses. You cannot avail of this benefit, if you are staying in your own home or HRA is not a part of your salary.
5.Other Sections
- Under Section115 BBDA, the dividend on equity investment is subjected to tax exemption up to 10%.
- As per Section 54C, the long- and short-term gains on the sale of a capital asset are exempted for a tax up to 20%.
- According to Section 44AD, up to 20% of profit can be exempted from tax.
So, amongst all Mediclaim 80 D is the easiest, affordable, and safest way to lower your taxable income. It not only provides you complete coverage against any medical emergency but also supports financially during money crunch. Check the Mediclaim plans offered by Care Health Insurance to avail exemption from tax. These Mediclaim plans saves your money and protect your future. However, you can opt for other ways as well to save more.
Also Read: Newly Drafted One Nation, One Common ITR
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