7 Small Ways to Save 4 Lakh+ Every Year | Tax Saving Tips

Hello! My Dear Friends

Today's blog will be all about how you can save lakhs of amount every year, just knowing the ways to save tax. Or you can say the ways to Legally avoid tax.

What is Tax?

So tax is a compulsory financial charge imposed on a taxpayer by the government.

Why the Government imposes Tax?

In order to fund government spending and public expenditures like roads, public transportation, public safety, military, research, etc. 

How to Save Tax?

So if I ask a question to you how can we save tax. The first answer I will get is 80C and that is absolutely correct. We can actually save Rs.1,50,000 every year from 80C, but do you know there are various other ways that eventually help us to save or avoid tax. I will try to list everything and explain you in detail with examples -

• 80CCD
• 80D
• 80DD
• 80E
• 80QQB
• 80TTA
• 80RRB
• Exemptions - HRA, Petrol Allowance, Internet Allowance, Mobile Allowance.

Types of Tax Saving Sections

1. 80C -   Under this section, we can save up to Rs. 1,50,000 by investing in a few government term policies or equity-linked saving schemes.

    Policies/Deductions under 80C - 

• Provident Fund
• Public Provident Fund
• Life Insurance
• Sukanya Samriddhi Yojna
• Equity Linked Saving Scheme - Minimum Lock-in period of 3 years (Kind of Mutual Fund)
• Fixed Deposit - With 5 years of Lock-in period 
• Stamp Duty and Registration Charges while purchasing property
• Senior Citizen Saving Schemes
• National Saving Certificate

    Maximum Amount that can be Saved - Rs. 1,50,000.

2. 80CCD -   This section basically covers the investment done under Pension Schemes. If you ask someone how much you can save under this section then the answer will be Rs. 50,000. But the truth is actually you can save Rs. 1,50,000. Under 80CCD(1) the maximum availed amount is Rs.1,00,000 and 80CCD(2) its Rs.50,000.

    Policies/Deductions under 80CCD -

• National Pension Scheme  - It cannot be availed fully before completion of 60years of the investor, also after 60 years the matured amount will be divided as annuity 40% and Lumpsum 60% (I will attach a link soon on detailed description about NPS soon).

    Maximum Amount that can be Saved - Rs. 1,50,000.

Note -  Maximum Sum of 80C + 80CCD = Rs.2,00,000 per annum. So you need to manually decide where you want to invest how much. You can actually invest Rs.3,00,000 but while applying for the tax deduction you can avail only Rs.2,00,000 for 80C and 80CCD combining.

3. 80D -  This section basically covers the investment done on health insurance for self and family members and you can save up to Rs.65,000 using this section.         

   

Covered Individual	Exemption Limit	Health Check-Up Included	Total Deduction
Self  and Family	INR 25,000	INR 5,000	INR 25,000
Self and Family + Parents	INR (25,000 +25,000) = 50,000	INR 5,000	INR 55,000
Self and Family + Senior Citizen  Parents	INR (25,000 +30,000) = 55,000	INR 5,000	INR 60,000
Self (Senior Citizen) and Family + Senior Citizen  Parents	INR (30,000 +30,000) = 60,000	INR 5,000	INR 65,000

         Maximum Amount that can be Saved - Rs. 65,000.

4. 80DD -   All Indian citizens can claim tax deduction under this section when any of your dependent members is more than 40% disabled and going through any medical treatment. You can avail up to Rs.75,000 in case of above 40% disability and up to Rs.1,25,000 in case of more than 80% disability.      

        Maximum Amount that can be Saved - Rs. 1,25,000.

5. 80E -   This section is for a claim against interest in Education loan, so this tax benefit can be claimed by the child(student) or parent depending on who is paying the education loan. So there is no limit to claim here but you can maximum avail it up to 8 years starting from the month the first installment paid.

So if Rahul has a gross salary of Rs.6,50,000 and interest for the education loan is Rs.2,00,000 for this financial year. Then taxable income for Rahul will be Rs.4,50,000.

        Maximum Amount that can be Saved - No Limit on Interest.

6. 80QQB - Under this section, you can claim up to Rs.3,00,000 under Royalty income from any source like you are an owner of a book and you are earning money from there, etc.

        Maximum Amount that can be Saved - Rs. 3,00,000.

7. 80TTA - Under this section, you can claim up to Rs.10,000 under income from other sources. So if you get interest from a bank account, you can easily show it as income from other sources and avail a benefit.

        Maximum Amount that can be Saved - Rs. 10,000.

So Actually if you think and file your tax properly taking all these sections under consideration you can easily avoid tax and save a huge part from your Salary.

Bonus Tip 

• Try to declare all your deduction in month of April only so that no amount will get deducted as tax for the full financial year and you can easily do all investments by December or January and submit all proofs.

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