If you have a salary above Rs 20 lakhs, it is important to plan your taxes effectively to maximize your savings. Here are some tax tips that can help you reduce your tax liability and save money:
Invest in tax-saving instruments
Investing in tax-saving instruments is one of the most effective ways to reduce your taxable income. Some of the popular tax-saving instruments include Equity-Linked Savings Schemes (ELSS), Public Provident Funds (PPF), National Pension System (NPS), and tax-saving fixed deposits.
ELSS is a type of mutual fund that invests predominantly in equities and offers tax benefits under Section 80C of the Income Tax Act. You can claim a deduction of up to Rs 1.5 lakhs in a financial year by investing in ELSS. PPF is a long-term investment option that offers guaranteed returns and tax benefits. You can claim a deduction of up to Rs 1.5 lakhs in a financial year by investing in PPF.
The overall limit of investments under this is upto INR 1.5 lakhs including LIC, PPF, ELSS etc.
NPS is a government-sponsored pension scheme that offers tax benefits under Section 80C and Section 80CCD of the Income Tax Act. You can claim an additional deduction of up to Rs 50,000 in a financial year over and above the ceiling of 1.5 lakhs by investing in NPS. Tax-saving fixed deposits are also a popular investment option that offers tax benefits under Section 80C of the Income Tax Act.
Also Read: Salaried? Still confused about Income Tax Regime selection? Do this
Opt for the new tax regime
The government has introduced a new tax regime that offers lower tax rates and eliminates the need for claiming deductions and exemptions. If you are not claiming too many deductions, you may want to opt for the new tax regime to save money on taxes.
Under the new tax regime, you can claim tax rates of 5%, 10%, 15%, 20%, and 30% for different income slabs. However, you will not be eligible to claim deductions under Section 80C, Section 80D, and other sections of the…
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