Written by : DG Gupta

A financial professional, qualified Chartered Accountants and Company Secretary examinations and enriched with experience of all types of accounting, taxation and compliance of Manufacturing as well as Service Industries

How to Save Tax without Investment?

DG Gupta
DG Gupta, CA, CS

Sep 28, 2021 01:18

Humans have had ideas and affinity regarding money for as long as its conception. Countless wise people have shared their views on money over the years. Although not everybody will agree on the popular ways to make, save, and spend money. But when it comes to money, among the most frequently cited subjects is taxes. Folks are looking for ways to save money on their taxes. Nobody wants to pass up opportunities to save money on taxes. Varied individuals have varying views on how to do that.
Talking about taxes, filing income tax returns (ITRs) may be time-consuming for individuals. Not only must one guarantee that the taxes are paid on schedule, but they must also guarantee that their investments for saving taxes are completed. Unless a person doesn't at all claim all of their available deductions, they probably end up paying more taxes than they could have saved.

Folks usually invest in financial avenues that lead to saving tax such as Public Provident Fund (PPF), National Savings Certificate (NSC), tax-saving fixed deposit, National Pension System (NPS), life and health insurance policies, etc. However, the broadly accepted idea that one must invest indulge in the above tax saving tips to save taxes is not always correct.

Aside from these, a few more tax saving tips may help you lower your tax burden without indulging in any investments.

So, let’s dive right into it.

1. Get a Home Loan

Obtaining this loan is among the best tax saving tips you would come across. It offers several deductions. A specialized provision was being put into effect for individuals buying a property for the very first time, allowing a deduction for interest paid on housing loans. Home loan EMIs are made up of a principal component and an interest component. Usually, you can deduct up to Rs 1.5 lakh from your house loan principal payments under Section 80C. Under section 24B, you can also deduct up to Rs 2 lakh from your interest repayment.

Individual taxpayers are eligible for deductions worth up to Rs. 50,000 under section 80EE of the Income Tax Act for the interest component of their EMI payments. However, the residential property value cannot exceed Rs. 50 lakh and the loan amount should not exceed Rs. 35 lakh.

2. Tuition and Hostel Allowances for Children

Children’s education expenditure occupies a large chunk of money. In a nutshell, it sounds reasonable to maximize the tax advantages associated with these expenditures.

Section 80C helps families to claim a tax deduction for tuition fees paid for their child's schooling of up to Rs 1.5 lakh. Section 10(14) of the Income Tax Act of 1961 exempts any special allowance made by an employer to an employee for the schooling of the employee's children (up to a maximum of two) as well as hostels expenses. The exemption is limited to Rs. 100 per month, while the hostel cost is limited to Rs. 300 per month.

Furthermore, this advantage only applies to the tuition cost and not additional payments such as development fees, late payment fees, and so on. Bear in mind that this is an excellent tax-saving tip that applies to any full-time education program provided at any recognized institution, including schools, universities, and even pre-schools and nurseries.

3. House Rent Allowance

While discussing Tax-Saving Tips, how can one overlook House Rent Allowance? When you're a salaried individual who lives in rented accommodation, you could save some tax by paying rent to the tenant. You can be eligible for the House Rent Allowance (HRA) depending on your rent amount. If your company offers a home rent allowance (HRA), you can claim a deduction for the rental payments under Section 10(13A) of the Income Tax Act.

HRA is applicable in the following cases:

• 40 to 50% of the salaries ( 50 % if the employee lives in a metropolitan city)
• the exact amount of HRA received
• Rent over 10% of the employee's income

Taxpayers must provide rent receipts and other information to the employer for the employer to calculate the exemption amount and claim Tax benefit.

4. Medical expenses

Section 80D allows for a tax deduction for medical insurance premiums payable, preventative health check-up expenditures, and other health costs, subject to certain limits. Medical coverage premiums paid for the self, spouse, or dependent children can be exempted up to Rs 25,000. A further deduction of up to Rs 25,000 can be obtained for health care coverage paid for parents under the age of 60. The discount is also possible if you purchase Covid-specific health insurance.

Similarly, healthcare costs spent for senior citizen parents can be deducted up to Rs 50,000 if somehow the senior citizen has no health insurance coverage. The provision also provides for a deduction of up to Rs 5,000 for preventative health check-up expenses. This expenditure is included in the total limit, if applicable.

5. Education Loan

With the stress of rising education expenses, an education loan is one of the best Tax saving tips. Taxpayers who may have taken out an education loan for higher education may be eligible for a tax deduction under section 80E of the Income Tax Act. They can claim a tax deduction for loan interest payments for themselves, their spouse, or their children. But, the deduction is not permitted on the principal component of the loan, and the timeframe for this deduction is 8 years. It begins either when the repayment period starts or when the interest amount is settled completely.

Higher education should be the goal of the loan. It can be any course/degree after completing senior secondary school or its equivalent in India or abroad.

6. Employees’ Provident Fund

The Employees' Provident Fund serves as the foundation for retirement savings and a phenomenal Tax saving tip for many salaried employees. Although they must invest at least 12 percent of their base pay and dearness allowance as Employee’s Provident Fund. However, they can go over this limit (up to 100% of their base income plus DA) under VPF (Voluntary Provident Fund) scheme. It is a voluntary contribution in addition to the required EPF contributions.

Employee contributions to a qualified provident fund are deductible under section 80C of the Income Tax Act, with a maximum deduction of Rs. 1.5 lakh.

Downsize your tax burden with Gotaxfile’s tax-saving tips

There might be a variety of reasons why taxpayers would not use tax-saving instruments. They can, however, use certain Tax-saving tips to save money on specific costs that are tax-deductible. Through appropriate preparation, taxpayers can claim deductions for the above-mentioned costs and save tax without investing during the fiscal year.

GoTaxfile is a digital accounting firm that offers professional financial, taxation, and accounting services. Our purpose is to employ smart technology to enhance and accelerate the process, empowering entrepreneurs by concentrating on their corporate objectives while providing the necessary help. Gain access to Tax Mentors, CA, and CPA in India that have business experience and will treat you with Tax-saving tips. Our specialists will guide you through the whole process of saving taxes without making any investments.

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DG Gupta
DG Gupta, CA, CS

Sep 28, 2021 01:18

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