Ever wondered about how it feels to be debt-free and be financially responsible? It feels wondrous to have enough time and money to spend with your friends and family. But not everyone knows how to save money and prepare for financial emergencies.
Saving money is a skill in itself that some people have mastered it so beautifully that they live their life full of confidence. Even if you are saving some money along with your job or business, paying huge taxes can feel like a burden.
There are many ways in which you can pay income tax and be a responsible citizen. Let us look at some of the most prominent methods to save income tax and being a responsible citizen of the country:
Invest in Government Schemes Under Section 80C
The government has offered investment schemes to lower the burden of taxpayers of the country. These schemes not just save income tax but also make you a responsible citizen of the country. You can claim up to Rs. 1.5 lakh spent on such investment as tax waivers on total annual income.
Given below are some tax-saving investments under section 80C of the income tax Act, 1961
- Senior Citizen Savings Scheme (SCSS)
- Sukanya Samriddhi Yojana (SSY)
- National Pension Scheme (NPS)
- Public Provident Fund (PPF)
- National Pension Scheme (NPS)
Different schemes have different returns and lock-in period. For instance, If you invest in Public Provident Fund (PPF), you will get a return of 7% to 8% with a lock-in period of 15 years.
There are few exceptions in the lock-in period of these schemes depending upon the nature and provinces of the investment. For example, If you are planning to invest in the National Pension Scheme (NPS), you will get returns from 12% to 14%, provided the lock-in period is till retirement.
Invest In Fixed Deposits For 5 Years
If you are investing in a fixed deposit for a minimum lock-in period of 5 years, you can take advantage of tax deduction under section 80C of the Indian Income Tax Act, 1961. Since FD is a bank-based investment, it has earned the trust of millions of people that their money will be safe under RBI surveillance.
There are many benefits of tax-saving fixed deposits. Some of them are listed below:
- It is easier to get a loan on the FD amount for lesser interest.
- Investors can enjoy flexibility in the amount and tenure.
- FD earns a lot more than saving accounts because of higher interest.
Get A Home Loan And Enjoy Tax Benefits
Everyone has a dream home, but buying a home without a loan can burn a hole in your pockets. Availing a home loan comes with dual benefits, as it allows you to save income tax, and you can have your own home.
Many government schemes such as PMAY (Pradhan Mantri Awas Yojana) and DDR (Delhi Development Authority) are helping to build affordable housing in India.
Under Section 80C, the income spent on loan repayments is eligible for deductions of up to ₹1.5 Lakh. You can also get a tax deduction of up to ₹2 Lakh annually under section 24(b).
Apart from this, if you are purchasing a property for house construction, you can get several benefits under section 24(b), provided that the construction process is completed within five years or less.
Purchase A Health Insurance Policy
Medical expenses are on the rise in India, and they are the unavoidable cost that everyone faces in their life. Health insurance can be a great help to be prepared for tough times, and you can also save some tax.
Moreover, buying a good health insurance policy has become a necessity because they reduce your financial pain at times of failing health conditions.
There are lots of tax benefits provided by the Indian government, which allows you to get the best healthcare for low additional charges. You can claim a tax deduction under section 80D, on the portion of your income spend on premium payments of your health insurance.
Consider Life Insurance Plans
Life insurance policies can protect your family and help you save your income tax at the same time. Buying life insurance is a must, especially when your family is dependent on your income to survive. There are many insurance companies, which offer hundreds of plans for different needs and age groups.
While buying an insurance policy, you must consider the tax implications of taking a life cover too. Under section 80C of the Income-tax Act, the premium payments are eligible for a tax deduction. The insurance company must be approved by the Insurance Regulatory and Development Authority of India (IRDAI) to qualify for a tax deduction.
Use Business Utility Expenses
If you are not a salaried person but a businessperson, there are a lot of ways in which you can save an immense amount of tax.
A feasible method is to use business utility expenses mentioned below:
- Preliminary expenses
- Convenience Expenses
- Regular Expenses
- Depreciation Expenses
Pay your taxes on time to avoid hefty penalties that can affect your profits negatively. There are lots of gst software available in the market that you can use for smooth business operations. Another great way to save money is to file your tax return before gst return filing dates.
Donate To Charity
Another great way to save income tax is by doing some charity to the specific organizations. The Indian government has allowed people who donate to leverage the tax deduction under section 80G of the income tax Act.
A deduction can be claimed only if the contribution made to specific organizations is either via cash or cheque. Donations to foreign trusts are not eligible for any kind of tax deduction.
If you are donating to an organization that is helping in rural development or scientific research, you can avail of the benefits of tax deduction under section 80GGA.
Support A Political Party
Under section 80GGC of the income tax Act,1961, all donations made to a political party are eligible for a tax deduction. Mode of payment for these donations must be bank transfer or wire, as the cash or cheque options are strictly not allowed.
The supported political party must be registered under Section 29A of the Representation of the People Act of 1951.
These are some of the great ways to save money while being a responsible citizen of India. Saving money is an essential skill that everyone must learn to excel in life. By adopting to mentioned methods, you can become a financially responsible person who knows how to use their money wisely.