What Are the Best Ways to Lower Taxable Income? 💹

There are a host of tax-saving tools under the Income Tax Act, 1961, where you can invest to build your wealth while reducing your taxable income.

Now, for you, the ultimate tax-saving goal would be to lower your taxable income to 5 lakhs or lower. You can reduce your taxable income by investing and exhausting the various tax deduction limits defined under multiple sections.

You can achieve income tax reductions by undertaking the following points:

  1. Invest in products applicable under section 80C.

The below-mentioned investments/payments reduce your taxable income by Rs 1.5 lakh.

  • PPF (Public Provident Fund)
  • Tax Saving FDs
  • ELSS (Equity Linked Savings Scheme)
  • NSC (National Saving Certificate)
  • Life Insurance Premium
  • NPS (National Pension Scheme)
  • Home Loan Repayment
  • Payment of tuition fees
  • PDF (Employee Provident Fund)
  • Senior Citizens Savings Scheme
  • Sukanya Samriddhi Yojana
  • ULIP (Unit Linked Insurance Plans)
  • Tax Saving Mutual Funds
  • Child’s tuition fee amount
  1. Invest in Health Insurance

Investing in health insurance will allow you to claim a tax deduction up to Rs 25,000 towards the premium you pay annually under section 80D. The deduction can be increased to Rs 50,000 if the policyholder or the spouse is over the age of 60.

  1. Claim deduction on your House Rent Allowance

If your salary includes House Rent Allowance, you can claim tax deductions on the allowance amount. If you are a salaried employee and do not get HRA but pay rent, you can claim a tax deduction up to Rs 60,000 under section 80GG.

  1. Claim deduction on your home loan interest

Under section 24 of the Income Tax Act, you can claim a tax deduction to reduce taxable income on your home loan interest amount. The limit under the section is up to Rs 2 lakh.

  1. Do not empty your savings account

Claiming tax deductions on your savings account interest is one of the easiest ways to reduce taxable income. Under section 80TTA, interest on the savings account is tax-exempted up to Rs 10,000. The limit is Rs 50,000 for senior citizens under section 80 TTB.

  1. Contribute to charity

Donating to charities verified by the government can help you claim tax deductions between 50%-100% of the contributed amount and up to 10% of your adjusted total income under section 80G. If the donation has been towards scientific research or rural development, you can claim a tax deduction under section 80GGA.

Community Manager.