Tax is something that every income earner knew about. A person needs to pay taxes to the government on goods he purchases, and on the income he earns. Paying tax is mandatory in India. More than 10 Million people in India pay taxes to the government every year. But there are options available in the law that help a person save some money while paying taxes.
Here in the article, we will be discussing how to save income tax? How to reduce income tax? Read on to learn tips and tricks for saving taxes.
What is income tax?
Income tax is a type of tax that people pay on the income generated. Both business and individuals pay income tax to the government on the money that they make. Income tax is the most common type of tax filed by salary employees every year. The usually chartered accountant or tax officer helps an individual or business to file taxes. Yet, one biggest concern of tax filing people’s how to reduce income tax.
The law offers certain deductibles those eligible taxpayers can make use of to reduce their liability. Income tax saving is the most popular way to ensure you don’t pay more than wants necessary. In the next part of the article, we will be discussing more on this topic.
How to save income tax on salary?
If you are wondering about how to save income tax on salary, then read this part of the article. The best way to save tax on salary is by opening a PPF account. PPF is an income tax saving account started by the government of India. The tenure for this account is 15 years. It promotes a habit of saving among income earners and family. And in return reduces their liability on paying income tax.
The next answer to the question of how to save tax is an investment. Investing in a life insurance policy is an ideal way to save income tax. It protects the family and policyholder against uncertainty and at the same time, acts as tax-deductible.
The last and most effective way for income tax saving is certain expenses. Payments made towards tuition fee, home repayment loans are deducted from taxable income. Apart from this, there are various income tax saving tips.
Tips for savings income tax
The list of income tax saving tips is as follows:
- Making investments in schemes that offer deductions.
The best way to save tax, as mentioned above, is investing in schemes such as PPF. Other than there are plenty of government recognized schemes which offer deduction. These investments are PF, insurance, NPS, ELLS etc.
- Save tax on interest earned from saving account:
Opening a saving account makes sure you have some money saved up for later use. This account also comes with interest. The interest earned from saving accounts is tax-free. Developing a habit of saving is important for reducing taxable liability.
- National saving certificate:
The most popular answer for how to save income tax on salary is NSC. This is a type of scheme certificate that a person can get from the post office. The minimum investment for NSC is 100 rupees. The National saving certificate comes with a lock period of 5 years or 10 years. Up until the time limit expires, any individual cannot withdraw the certificate. NSC is the best tax exemption available for salary employees.
- Bank FD’s
Fixed deposit is a type of account available in the banks. In this type of account, a sum of money is kept in the bank for the duration. The duration can be from 3 months to 10 years. FD amount earns income, and it is exempted from the taxable income.
For more information on how to reduce income tax read the next paragraph.
How to reduce income tax?
For the question of how to save income tax in India there are plenty of answers. The best and most effective answer to the question is reducing taxable income. As previously mentioned in the article investment, saving and paying off the loans can reduce taxable income.
In addition to this, a taxpayer can take a deduction on rent, transport allowance, home allowance, donations and medical cover for the family.
Bottom Line:
Paying taxes is important and necessary for the well-being of a person and nation. But when it comes to the question of how to save income tax, the ways to do it are endless. No person wants to spend his hard-earned money only on taxes. To develop a habit of saving and use the points mentioned in the article to answer your question about how to save income tax in India.