If you’re looking to save taxes before the 31st March 2025 deadline in India, there are several options to reduce your taxable income and take advantage of tax-saving provisions under the Income Tax Act. Below are some effective ways you can save taxes before the end of the financial year:
1. Maximize Deductions under Section 80C (Up to ₹1.5 Lakhs)
Section 80C offers a range of investment options for tax-saving. The maximum deduction allowed under this section is ₹1.5 lakh in a financial year.
- Public Provident Fund (PPF): A long-term savings option with tax-free interest and maturity.
- Employee Provident Fund (EPF): Contributions to EPF are eligible for deduction under Section 80C.
- National Savings Certificates (NSC): A fixed investment option that qualifies for tax benefits.
- Tax-Saving Fixed Deposits: Fixed deposits with a 5-year lock-in period are eligible for deductions.
- ELSS (Equity Linked Savings Scheme): Tax-saving mutual funds that offer both equity market exposure and tax benefits. They have a 3-year lock-in period.
- Principal Repayment on Home Loan: The principal portion of your home loan EMI is eligible for deduction under Section 80C.
2. Section 80D – Health Insurance Premiums
Under Section 80D, you can claim deductions for premiums paid for health insurance policies.
- For Self, Spouse, and Children: Up to ₹25,000 per year (₹50,000 for senior citizens).
- For Parents: An additional ₹25,000 (₹50,000 if parents are senior citizens).
This is a great way to save on taxes while securing health coverage for your family.
3. Section 24(b) – Home Loan Interest
If you have a home loan, you can claim a deduction of up to ₹2 lakh under Section 24(b) for interest paid on the home loan during the financial year. This deduction is available for both self-occupied and rented properties.
4. National Pension Scheme (NPS) – Section 80CCD(1B)
Under Section 80CCD(1B), you can claim an additional deduction of ₹50,000 for contributions to the National Pension Scheme (NPS). This is over and above the ₹1.5 lakh limit under Section 80C.
5. Section 80E – Interest on Education Loan
If you’ve taken an education loan for yourself, your spouse, or children, the interest paid on the loan is eligible for a tax deduction under Section 80E. The deduction is available for up to 8 years or until the interest is paid, whichever is earlier.
6. Section 10(14) – House Rent Allowance (HRA)
If you’re living in a rented house, you can claim a deduction on House Rent Allowance (HRA). The deduction is subject to conditions such as your salary structure, the rent paid, and your city of residence.
7. Section 80G – Donations to Charitable Institutions
Donations made to charitable organizations and NGOs are eligible for tax deductions under Section 80G. The deduction can be 100% or 50%, depending on the organization. For instance, donations to the Prime Minister’s Relief Fund are eligible for a 100% deduction.
8. Tax-Free Allowances
Certain allowances are exempt from tax, including:
- Food Coupons/Meal Vouchers: Up to ₹50 per meal for employees.
- Leave Travel Allowance (LTA): Can be claimed for travel expenses for domestic trips.
9. Capital Gains Tax Planning
If you’re planning to sell long-term assets (like property or stocks), you can manage capital gains tax by:
- Investing in Capital Gains Bonds (Section 54EC): If you sell long-term capital assets like land or property, investing in specified bonds can help you claim a tax exemption.
- Section 54 – Residential Property: If you sell a house property and invest in another house, you can claim an exemption on long-term capital gains tax under Section 54.
- Section 54F – Sale of Other Assets: If you sell any asset other than a house and invest in a residential property, you may be eligible for a tax exemption under Section 54F.
10. Interest on Savings Accounts (Section 80TTA)
Interest earned from savings accounts is eligible for a deduction of up to ₹10,000 under Section 80TTA. This applies to both savings bank accounts and post-office savings schemes.
11. Tax Planning for Your Salary
- Reimbursement of Expenses: Certain reimbursements like telephone bills, internet, and travel allowances are tax-free and can be added to your salary package.
- Salary Restructuring: You can optimize your salary structure by adding tax-saving components like HRA, special allowances, and others.
12. Reinvest Dividends in Tax-Exempt Bonds
Dividends received from certain investments are tax-exempt. You can reinvest these dividends in tax-free bonds to further grow your savings and reduce taxable income.
13. Tax-Loss Harvesting
If you have investments in mutual funds or stocks, you can offset your gains by selling some of your loss-making investments to reduce your overall taxable income.
To Recap:
Before 31st March 2025, you should consider:
- Maximizing 80C investments.
- Buying health insurance under Section 80D.
- Claiming home loan interest deductions.
- Contributing to NPS under Section 80CCD(1B).
- Donating to charity under Section 80G.
- Utilizing exemptions on HRA and meal vouchers.
- Tax-efficient capital gains planning.
Tax-saving strategies depend on your personal financial situation. You can consult with a financial advisor to tailor your tax planning based on your goals and available resources.
