Income Tax Deductions and Slab Rates
Planning your tax smartly can help you in saving your money and will also offer you tons of benefits. If you are planning to invest and save on your tax, planning is the key. There are many tools that you can use to effectively plan your tax savings. However, to make the most out of it, you have to start planning from very beginning.
What is Income Slab?
The Income Tax Department of India put different Indian citizens into different categories according to their yearly income. The relationship between the tax to be paid and a citizen's annual income is defined by income tax slabs. These slabs are referred to as tax rates or tax brackets, and they keep on rising as a citizen's income rises with time. These income tax slabs also change every year.
Methods to Save on Income Tax
If your income falls into a higher Income Tax slab, it can be worrying to pay so much in taxes. However, there are few effective ways in which you can save your money and make your income tax slab fall a few rows. These methods are mentioned below:
- Submitting Rent Receipts:If you receive HRA from your employer and live in a rented house, then you are eligible for a tax deduction under the Income Tax Act Section 10(13A). There are a few factors that decides if you will be exempted from your taxable income:
- Amount paid in home rent
- HRA given by your employer
- Buying Health Insurance:Health insurance is a great way to ensure the safety of your family members. Moreover, Section 80D allows you to deduct up to Rs.25,000 in premiums paid in any form other than cash to cover yourself, your spouse, and dependents, with a maximum deduction of Rs.50,000 for senior citizens. Hence, buying health insurance can assist you to avoid sliding into a higher tax rate by lowering your total income.
- Donations:If you donate any amount to any charity or relief funds, your donations will be exempted from taxes under the Income Tax Act Section 80G.
- Taking Home Loan:You can claim tax deduction of up to Rs.2 lakhs if you are building a new home and have taken a home loan against it. However, to be exempted from this you should be residing in the house that you bought a home loan for.
- Taking Education Loan:Taking up education loan for your child's higher education, will make you eligible for tax exemption under Income Tax Act Section 80E. This exemption can be availed for 8 years or until the time you have repaid the interest on the loan.
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