How to save Income Tax
Tax Saving LIC plans work as a dual cover to the policyholders. Here is a guide presenting the best ways to reduce your taxable income in India. In a situation wherein you have exhausted all options in your personal capacity; then your dependents including Children & Parents can help you save income tax under sections 80C, 80D, 80E.
Most of our tax savings occur due to deductions that we get under Chapter VIA of The Income Tax Act, 1961. The easiest available options lie under Section 80 of Chapter VIA, and this is where you can leverage your chances to save more while also availing some awesome benefits simultaneously for our dependents. Let’s have a look at how exactly we can resort to Section 80 when everything else is exhausted.
• Tuition Fees for Children
We can avail deduction up to Rs. 1.5 Lakh for education-related tuition of our children under Section 80C. This section allows a deduction for a maximum of two children. If you have a daughter or two daughters, you can consider investing in Sukanya Samriddhi Yojana to avail of the same deduction.
• Health Insurance Premium for Parents and Children
You are eligible for a deduction of up to Rs. 75,000 under Section 80D for payments regarding health insurance premiums. The maximum deduction is Rs. 25,000 if the payment has been made for the policies of your wife and children. You are eligible for an additional amount of up to Rs. 25,000 if you pay health insurance premiums for your parents. In case your parents are senior citizens, the maximum deduction for the same will double up i.e. Rs. 50,000.
• Education Loan for Abroad Studies of your Children
We all wish to send our children abroad for further studies. Keeping this in mind, the Income Tax Department has incorporated Section 80E which allows for the deduction of the interest part of the loan acquired for abroad studies of our children’s higher studies. But keep in mind that the deduction is only available for the interesting part.
The deduction can be availed from the year in which the loan repayment starts. There is no limit on the amount of deduction. This deduction is available for a maximum of 8 years or till the loan has been completely repaid by the assessee.
• Gifting money to parents for investment purposes
Unlike a normal individual, senior citizens aged between 60 and 80 years get a basic tax exemption of Rs. 3,00,000. If your parents are aged above 80 years, the slab is further increased to Rs. 5,00,000. So this allows you to gift them some money to lower your tax liabilities. Let us find out how –
We all know that Gift Money in the hands of family members are not taxed. So if your parents are in a lower tax slab than you are, you can reduce your tax liability by gifting them some money. If you want to further boost the savings, ask them to invest in specified securities eligible under Section 80C for deduction and save some money. This idea can also be successful if you transfer some amount to your non-minor child, who falls in a lower tax slab than you do.
• Paying Rent to your Parents
If your income consists of Salary majorly, you have another chance to claim some deduction. All you need to do is to pay rent to your parents if the house belongs to your parents. This will make you eligible for availing of HRA Exemption or deduction under Section 80GG. The rental income is taxable in the hands of your parents.
We hope that you have found these ideas useful and try and utilize them to reduce your tax liability as far as possible.
In the end, saving tax is not a big thing. You need to plan well and execute on time.
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