Introduction
Planning your income wisely requires primarily consulting a tax planner. As he or she will guide you regarding the income tax deductions you can avail and reduce the tax on your income. Well, in order to learn how actually can you minimize Income tax, read the income tax slab rates under Income Tax to know in which slab rate you are covered. In the article we will get to explore about “How to plan your income to minimize income tax?”.
Now, let us jump to our main concept of Income Tax Deductions which can help you minimize Income Tax.
Invest and claim a deduction of Rs. 1.5 Lakhs under Section 80C
Under Section 80C, if you invest in any of the below-mentioned categories, you can claim a deduction of Rs. 1.5 Lakh per annum.
- Public Provident Fund
- Tax Savings FDs
- Equity Linked Savings Scheme
- National Saving Certificate
- Life Insurance Premium
- Home Loan
- Payment of tuition fees
- Employees Provident Fund
- Tax Saving Mutual Funds
- Fixed Deposits
- National Pension Scheme
- Sukanya Samriddhi Yojana
- Unit Linked Insurance Plans
- Senior Citizen Savings Scheme
Go for Medical Health Insurance
Section 80D allows a deduction of Rs. 25,000 for medical health insurance. This deduction can be claimed by paying for medical purposes for self, spouse or children. And for senior citizens, the amount of deduction is Rs. 50,000.
Opt an Education Loan
If you opt for an education loan taken for higher studies, you can claim a deduction under Section 80E on the amount of interest loan. Maximum deduction of Rs. 40,000 can be claimed under Section 80E. Hence, this education loan can be taken for self, spouse, children or a student of whom an individual is a legal guardian.
Before buying a home, do buy a home loan
Availing of home loan will provide you a maximum deduction of Rs. 50,000. It is definitely the best way to save tax in India. However, this deduction can be claimed by first-time home buyers as you can get the benefit on interest paid on home loan. Section TTA of the Income Tax allows a deduction for home loans.
Claim Interest on Saving Account
The next way to minimize income tax is to claim a deduction of Rs. 10,000 on the interest amount of the Saving Account. Currently, the Section 80TTA providing a deduction for interest paid on a home loan is applicable only on an individual and HUF.
Contribute to charity
Section 80G of the Income Tax is available in the Income Tax to avail tax deduction on donations made to a charitable organization. Under the section, it is stated that if you contribute to a certain amount of fund to some relief funds and charitable institutions.
Here are some of the categories under which 100% deduction can be availed, namely:-
- National Defence Fund set up by the Central Government
- Prime Minister’s National Relief Fund
- National Foundation for Communal Harmony
- An approved university/educational institution of National eminence
- Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
- Fund set up by a state government for the medical relief to the poor
- National Illness Assistance Fund
- National Blood Transfusion Council or to any State Blood Transfusion Council
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
- National Sports Fund
- National Cultural Fund
- Fund for Technology Development and Application
- National Children’s Fund
- Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
- The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
- The Maharashtra Chief Minister’s Relief Fund during October 1, 1993, and October 6, 1993
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
- Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat (contribution made during January 26, 2001, and September 30, 2001)
- Prime Minister’s Armenia Earthquake Relief Fund
- Africa (Public Contributions – India) Fund
- Swachh Bharat Kosh (applicable from FY 2014-15)
- Clean Ganga Fund (applicable from FY 2014-15)
- National Fund for Control of Drug Abuse (applicable from FY 2015-16)
List of categories eligible for 50% deduction without qualifying limit
- Jawaharlal Nehru Memorial Fund
- Prime Minister’s Drought Relief Fund
- Indira Gandhi Memorial Trust
- Rajiv Gandhi Foundation
List of donations eligible for 100% deduction subject to 10% of adjusted gross total income
- Donations to the government or any approved local authority, institution or association to be utilized to promote family planning
- Donation by a company to the Indian Olympic Association or any other notified association or institution established in India to develop infrastructure for sports and games in India or sponsor sports and games in India.
List of donations eligible for 50% deduction subject to 10% of adjusted gross total income
- Any other fund or institution satisfies the conditions mentioned in Section 80G.
- Government or any local authority, to be utilized for any charitable purpose other than promoting family planning.
- Any authority constituted in India to deal with and satisfy the need for housing accommodation or the purpose of planning, development or improvement of cities, towns, villages or both.
- Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community.
- For repairs or renovation of any notified temple, mosque, gurudwara, church, or other places.
Conclusion
All in all, investing in categories under Section 80C, buying a medical health plan, pursuing an education loan, and donating in some specified funds will help to reduce your Income Tax. I hope, you have got an answer to “How to plan your income to minimize income tax”.
Evidently, all of this is possible only with a tax planner along with you. Get in contact with EAdvisors Infotech LLP and get all the tax advice from them. Avail services from them and you can gain the maximum of tax benefits. EAdvisors deals in every type of company registration including government licensing.
