Income tax is that part of your income that goes towards the government. This tax authorizes the use of the money collected on an annual basis to perform administrative taxes. But when it comes to saving tax, you as a taxpayer should be aware of the most common tax-saving plans under section 80C of the 1961 Income Tax Act. Many ways are available that you can choose to save tax. Let’s find out the five ways to save income that we bet you didn’t know.
Who won’t like to save tax? We are aware that you and every other taxpayer out there are always on the lookout to save their income tax. Different people follow different methods for saving taxes. All taxpayers are aware of section 80C under the 1961 Income Tax Act. It is better to check out as many forms of saving taxes as you can so that you don’t miss out on more beneficial ways of saving taxes.
What is an income tax slab?
Indian income tax is applied on the basis of the slab system. In simple terms, the income tax slab system means different rates of taxes are prescribed for people with varying ranges of income. If your income has increased, then so will your tax rate. The slab tax method enables a very progressive tax system in India. Income tax slabs usually change every annual budget.
Here are the best five ways to save income tax:
Money received as a wedding gift- Wedding is an auspicious occasion and is the best day for people getting married. In India, a wedding is a grandiose affair, and almost always, the guest list is enormous. The gifts received by the couple during their wedding are non-taxable under section 56 (2). It can be a gift, cheque or cash; it is all non-taxable.
Extra income- If you have a secondary income apart from your primary job income, then you are eligible for saving money paid as tax from the income. Even if you freelance, it will be considered your secondary income, and for that, you will have to open a different HUF account. You can use that amount to invest to avail tax benefits under section 80C.
A little extra contribution to the NPS- The contribution to the NPS (National Pension Scheme) falls under section 80C. The limit usually is 150000. But you can easily invest an additional 50000 in NPS as this amount will be totally tax-free.
Health insurance plan premium- You can get tax benefits under Section 80D for health insurance premium tax deductions. A certain amount of money paid as your health insurance will not be deducted as tax. The amount that will not be deducted keeps changing every year. The premium you pay to buy health insurance for a senior citizen will help you save more.
The amount you received through inheritance- The amount that you received through inheritance is not taxable in India. It should be in the form of Will. As mentioned in the Will, the amount you are about to or have already received is not taxable.