Tax Saving Options Within and Beyond Section 80C
There are taxes levied upon the income generated by the individual/individuals, this tax on the income is imposed by the government and hence is called an income tax. So, it is a tax on an individual’s income or business. It is the duty of every tax-payer to file their annual income tax returns. Taxes are a source of revenue for the government but this revenue is further used for public welfare through services like- parks, public transport, roads, rails, etc. Before knowing some ways to save income tax in India, a clear explanation of how income tax works in India is given below.
Income Tax in India
Indian constitution in, Schedule VII under the union list, states that the central government has the authority to collect taxes on any income generated by an individual or business (other than the agriculture income). Moreover, the biggest portion of revenue government gets is from the income tax. According to the budget 2019-20, there is no noteworthy change in the income tax slab. It is the same as it was for budget 2018-19.
In general, income tax slab rates can be categorized as such:
Individuals and the Hindu Undivided Families (HUF’s)
- For male and Female Individuals below 60 years of age and HUF
- All senior citizens below 60 years of age
- For all superior citizens above 80 years of age
- Applicability of surcharge
- Co-operative societies
- Local authorities, Firms and Domestic companies
- Education Cess and SHEC
Tax saving options within and beyond Section 80C
As a citizen of India, it is compulsory for every self-employed or salaried person to pay income tax. A good citizen always abides by his duties. There is no shortcut to skip filing Income Tax Returns (ITR) but under various Sections of the Constitution, you have an option to save. Filing an annual ITR is mandatory and there is no escape from it, but there are ways to save.
- Holding shares or equity mutual funds for at a minimum period of one year, the profits earned can be non-taxable.
- If an individual has a sum of Rs 10,000/- in your savings account then you are exempted from paying the taxes on the same (having up to 10,000 INR in a savings account is not taxable). If the income earned from interests in 6000/- then you only have to pay taxes on 6000/-
- The educational scholarship is not taxable under the Constitution of India.
- In the hands of the shareholder, all dividends from stock and mutual funds are tax-free and therefore, it is one of the best options available to save income tax in India.
- Any presents that an individual receive at the time of his/her wedding in the form of cash/cheque/gifts are absolutely tax-free. There is no liability to pay taxes on these gifts.
- For medical expenses, tax-free amount is a maximum of Rs 15,000/-.
- Any income which is generated from agriculture is free from any taxes according to the Constitution of India.
- Anything that an individual receives as ‘inheritance’ is tax exempted. No taxes are to be paid with regard to the inherited income.
- Under section 80E Interest on education loan is also tax-free.
- Food expenses and travel/hotel expense can be saved from taxation by showing them all as a business expense.
Under Section 80C, Section 80CC, and Section 80CCD of the Income Tax Act of India, there are few exemptions to part of the earnings; these are mentioned as follows-
1. Education Loan
If someone has taken an education loan for children, spouse, oneself, etc. he can claim for deduction on the interest rate of the loan. It is stated under Section 80E of the Indian Constitution. This facility is available only when the loan is taken for the purpose of higher education. It is available for a period of eight years starting from the year the interest payment started.
2. The National Savings Certificate (NSC)
For the purpose of investing the income, National savings certificate is one of the best alternatives available. The NCS is readily available at any post office and it is operated by Indian Post. Under Section 80C, the amount invested in NCS is exempted from tax.
Public Provident Fund (PPF)
The public provident fund also called PPF is commonly available in banks and post offices. The Government of India heads and monitors this scheme. Also, is exempted from any taxes. An investment of Rs 5000/- to Rs 60,000/- can be made annually.
Equity Linked Savings Scheme (ELSS)
This also goes by the name of tax saver mutual fund and is easily available with banking and non-banking institutions. In addition, there are no limits to investing in ELSS. The two common schemes offered are- Mutual Funds and Systematic Investment Plan, MF’s and SIP’s respectively. Furthermore, investing in either of these can provide relief from taxes up to Rs 150,000/-.
National Pension Scheme
technology has facilitated the lives of people to a great extent, especially digitalization. A National pension scheme can be accessed online or by the bank and it is regulated by the Government of India. A maximum of Rs 150,000/- can be deposited under this scheme. Under Section 80CCD and Section 80 CCE, this is also free from taxes.
The constitution of India exempted married couples with children of any taxes concerning their education. A fee of maximum Rs 150,000/- can be exempted from the tax for a maximum of two children on per taxpayer will be deducted from the income. This is very advantageous the couples who are both working but also to individual earner because it reduces the tax burden and helps to save.
If you have health insurance, Under Section 80D, it is relieved from income tax. The total amount of the premium paid by the insured person will be deducted from the salary/income. A maximum benefit of 25,000/- can be availed by the individual for the premium paid for a self, spouse or under 18 children. Additionally, the deduction of 25,000/- can be claimed for the premium paid for one’s parents. In case of senior citizens, this deduction can be up to 50,000/-. If a person has a policy for oneself, spouse and parent, he has the authority to claim a total benefit of 75,000/-.
Interest on savings account
Under Section 80TTA, interest earned on the savings account is free from taxation. The deducted amount up to 10,000/- can be claimed.
Filing Income Tax Return (ITR) is now easier than it ever was. The long queues for the filing process are not there. The digitalization has enhanced the way people think and act. You can file ITR from the comfort of your home without waiting. Sometimes paying taxes seems irrelevant, but when thought about, they are for our own benefit. The Government utilizes all this money to provide various welfare services to the public. Paying the tax is mandatory but you have so many options to save the money.