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Tax Saving Tips 2021

1. Tax Deduction In Case of Availing A Home Loan:

In order to save tax you have to choose your Home Loan wisely in accordance with section 80C. The limit is Rs. 1,50,000 for the principal amount, and for the interest amount the limit is Rs. 2,00,000 under section 24.

Tax Saving Options under Sections 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80CCG, 80G

Here’s a list of tax-saving options for different sections.

2. Income from Savings Bank Account Interest:

The interest earned from saving account is exempt to the extent of Rs. 10,000 and in case of senior citizen the limit extends to Rs. 50,000.

3. Money Received from Life Insurance Policy:

Money received on maturity of life insurance policy can be received or on receipt of the claim amount. The amount received is exempt from tax if the premium is upto 20% of the sum insured. This applies to policies issued before 1 April 2012. In case of policies issued on or after 1 April 2012, this percentage drops to 15.

4. Scholarship for Education:

Such an amount is tax-free under Section 10(16) with no upper cap on the same.

5. Amount Received From Sold Shares or Sold Equity Mutual Funds:

If the amount of long-term capital gain is less than Rs. 1,00,000 it is exempt under Income Tax Act, 1961 and in case the amount exceeds the same tax rate of 10% is applicable.

6. Wedding Gift:

Any sum received on occasion of wedding is totally exempt from income under Section 56(2). Even gifts received in cash do not attract tax. Such gifts can be from any person.

7. Income from Agriculture:

Any kind of income derived from agricultural land defined as per section 10(1) is exempt under Income Tax. Such income can be related to revenue from land, revenue from land, the amount generated through agriculture products, the amount through a farm building and rent from land.

8. HUF and Extra Income:

You can constitute a HUF and show your extra income under HUF and get benefit of basic exemption limit of upto Rs. 2,50,000.

9. Provisions Under Section 80C:

In order to encourage savings, the government of India offers a deduction in respect to investment upto Rs. 1,50,000 as per section 80C of the Income Tax Act.

10. Amount from Provident Funds:

Interest received on the provident fund is exempt under Income Tax Act, 1961. And any amount withdrawn after 5 year of deposit is fully exempt.

11. Loan for Education Purposes:

Any amount paid in respect of interest on loan taken for education purpose is allowed as deduction under chapter VI-A.

12. Health Insurance Premium:

Any amount paid with respect to health insurance premium of self, spouse, children or parents is allowed as deduction under section 80D   

13. Money Spent on Donation to Charity:

Amount donated in notified institutions is allowable as deduction under section 80G.

14. Money Spent on Donation to Political Party:

Any amount donated to any recognized political party is allowed as deduction under section 80GGC.

15. Distribution of Profit in Partnership Firm:

Profits from a partnership firm are not taxable in hands of partners.

Tax-Saving Tips for Salaried Individuals:

Here’s a list of tax-saving options for salaried employees.

16. Leave Travel Allowance:

Employees can make use of this feature to cover travel tickets of spouse, children, and parents. Siblings are covered only if they are dependent on the salaried person. This falls under section 10(5).

17. When HRA is Part of Salary:

You should reside in a rented place to avail of this feature and you should possess relevant receipts. It falls under Section 10(13).

18. When HRA is Not a Part of Salary:

When HRA is not a part of the salary, the tax benefit can be availed in the following ways: 1) subtracting rent from 10% of income, 2) a flat rate of Rs. 5000 on a monthly basis, 3) 1/4th of total income. These deductions are a part of Section 80GG.

20. Standard Deduction:

There is a standard deduction of Rs. 50000. This is the maximum amount.

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