10 Ways to Reduce Your Taxes for FYR 2020-21
Its income tax time again, time to gather up all receipts, get out those mind bothering calculations, stab yourself to derive opportunities, tax cuts and reduce you taxes before late.
I have tried to point out the best tax saving options help you achieve tax cuts:-
- Section 80CCD – National Pension Scheme :- Over and above contribution of Rs 1.5 lakh under Section 80C, you can invest an additional Rs 50,000 in NPS which can be claimed as tax deduction under Section 80CCD. This gives you the option of claiming tax deduction of up to Rs 2 lakh every year by investing in NPS.
- Section 80D: Payment of health insurance premium: You can claim a tax deduction for premiums paid for your family members and your health insurance. This section allows you to claim a maximum deduction of Rs 25,000 per year on premiums paid for yourself, spouse, and your children. For parents additional deduction of Rs 25000 is available if you pay for medical insurance of your parents resulting Total deduction of Rs 50,000 under section 80D.
- Section 80D: Payment for health check-up: The amount spent on preventive health check-up is also eligible for deduction under section 80D – maximum limit of Rs 5,000 for self or family, including parents
- Section 80C: Opt for ELSS mutual funds (3 Years lock in) The Long-Term Capital Gains on ELSS are tax-exempt up to Rs 1 lakh, and dividend received is tax-free in the hands of investors. You can continue to invest in this scheme even after the completion of the lock-in period of three years This investment is within the limit of 1.5 Lakhs under chapter VI A, Section 80C.
- Section 80C: Stamp Duty and Registration Charges for a home bought: The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C in the year of purchase of the house
- Section 80GG: Rent paid for accommodation: This deduction can only be claimed if you do not get house rent allowance (HRA) as part of your salary, or if you are a self-employed person. To avail this deduction, you need to submit Form 10BA. You can claim deduction up to Rs 60,000 under this section.
- Section 24: Interest payment of a home loan: Taxpayers can claim the amount paid as the interest component of a home loan as a tax deduction under Section 24 of the Income Tax Act. The maximum limit under this section is Rs 2 lakh which can be availed as interest payment of a home loan for a self-occupied property
- Section 80C: National Savings Certificate (NSC) (VIII Issue): NSC is reliable time-tested tax saving instrument with a fixed maturity period of Five Years. Interest is Compounded Yearly. Investments in NSC are eligible for a deduction of upto Rs 1,50,000 p.a. under Section 80C. Furthermore, the accrued interest which is deemed to be reinvested qualifies for deduction under Section 80C. However, the interest income is chargeable to tax in the year in which it accrues.
- Section 80C: NABARD rural bonds: Bonds issued by NABARD (National Bank for Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two, only NABARD Rural Bonds qualify under section 80C
- Section 80C: Senior Citizen Savings Scheme 2004 (SCSS) : Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Interest Senior Citizen Savings Scheme 2004 is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable to tax. The account may be opened by an individual,
- Who has attained age of 60 years or above on the date of opening of the account.
- Who has attained the age of fifty-five years or more but less than sixty years, and who has retired on superannuation on the date of opening of the account.
- Retired personnel of Defence Services (excluding Civilian Defence employees) shall be eligible to open an account under this Scheme on attaining the age of fifty years subject to the fulfilment of other specified conditions