Check top tricks to save Money

When it comes to managing your finances, taxes often take a significant portion of your income. However, did you know that with the right strategies, you can reduce your tax liability and keep more of your hard-earned money? By taking advantage of various tax-saving opportunities, you can significantly lower your taxable income, which means you’ll pay less tax. Let’s dive into some of the best ways to save on taxes and optimize your financial planning.

Here are the ways to save the tax by making investments:

Understanding Deductions under Section 80C
One of the most effective ways to reduce your taxable income is by investing in instruments eligible for Section 80C of the Income Tax Act. This section allows you to claim deductions of up to Rs. 1.5 lakhs annually by investing in various instruments. Some of the most common options include:
• Public Provident Fund (PPF)
• Employee Provident Fund (EPF)
• National Savings Certificate (NSC)
• Tax-Saving Fixed Deposits
• Five-Year Fixed Deposit with Banks
• Life Insurance Premiums
• Sukanya Samriddhi Yojana (for girl children)
By channelling your savings into these instruments, not only do you secure your future financially, but you also enjoy a reduction in your tax liability.

Health Insurance Premiums (Section 80D)
Another way to save tax is through health insurance. Under Section 80D, you can claim deductions for premiums paid on health insurance policies for yourself, your spouse, children, and even your parents. The maximum deduction you can claim is:
• Rs. 25,000 for self, spouse, and children.
• Rs. 25,000 additional deduction for premiums paid for parents under the age of 60.
• Rs. 50,000 if your parents are senior citizens (60 years or older).
If you plan ahead and secure health insurance for both yourself and your parents, you can save up to Rs. 55,000 on your tax bill, which is a significant amount.

Scenario: Ramesh Kumar, with an annual income of Rs. 12,00,000, can save taxes by claiming deductions under Section 80D for health insurance premiums. He pays Rs. 20,000 for his own, his spouse’s, and his children’s health insurance, which qualifies for a deduction of Rs. 20,000 (below the Rs. 25,000 limit). Additionally, he pays Rs. 35,000 for his senior citizen parents’ health insurance, eligible for a maximum deduction of Rs. 50,000. In total, Ramesh can claim Rs. 55,000 as a deduction, reducing his taxable income to Rs. 11,45,000, thus lowering his tax liability.

Take Advantage of the National Pension Scheme (NPS)
If you’re looking for long-term tax savings while preparing for retirement, consider contributing to the National Pension Scheme (NPS). Under Section 80CCD(1B), you can claim an additional deduction of Rs. 50,000 over and above the Rs. 1.5 lakh limit of Section 80C. This means that investing in NPS not only helps you build a pension for your future but also provides an immediate tax benefit.

Rebate under Section 87A
For taxpayers with an annual income of less than Rs. 5 lakhs, there is good news: You can claim a rebate of up to Rs. 12,500 under Section 87A of old tax regime and If an individual’s total taxable income is up to Rs.7 lakh and chooses the new tax regime, they will be eligible for rebate of up to Rs. 25,000. This rebate directly reduces your tax liability, meaning if your taxable income falls within this range, you could end up paying zero tax. So, if your income is relatively low, this is a great way to save on taxes without having to make additional investments or expenses.

Home Loan Interest Deduction (Section 24)
If you’ve taken a home loan, you can enjoy tax benefits under Section 24(b) of the Income Tax Act. This section allows you to claim a deduction of up to Rs. 2 lakhs on the interest paid on your home loan for a self-occupied property. Whether you’re a first-time homebuyer or already own a home, this deduction can significantly reduce your taxable income, especially if you have a substantial home loan.

Tax Benefits on Donations (Section 80G)
Donating to charitable causes not only makes a positive impact on society but also provides tax benefits. Under Section 80G, donations made to registered charitable organizations are eligible for tax deductions. The deduction could be 100% or 50% of the donated amount, depending on the nature of the organization. For donations exceeding Rs. 2,000, make sure to pay via cheque or electronic transfer to ensure eligibility for tax deductions.

Tax Benefits for Senior Citizens
Senior citizens enjoy a host of additional tax benefits, making their tax planning more rewarding. For instance:
• Under Section 80D, senior citizens can claim a deduction of Rs. 50,000 for health insurance premiums.
• Section 80TTB provides a deduction of up to Rs. 50,000 on interest income from savings accounts, fixed deposits, etc.
• Section 80DDB offers tax deductions on medical expenses incurred for the treatment of specified diseases. For senior citizens, the deduction can go up to Rs. 1 lakh.
These benefits not only help senior citizens reduce their tax burden but also ease the financial strain of healthcare and living expenses.

Medical Treatment Expenses (Section 80DDB)
In case you or your family members incur medical expenses for specified critical illnesses like cancer, neurological disorders, or chronic renal failure, Section 80DDB allows you to claim a tax deduction. The maximum deduction for general taxpayers is Rs. 40,000, while for senior citizens, it increases to Rs. 1 lakh. This provision provides financial relief for those dealing with high medical costs, making it easier to manage healthcare expenses.

Gratuity and Pension Exemption
If you work for the government, gratuity received at the time of retirement is fully exempt from tax. For non-government employees, gratuity is exempt up to Rs. 20 lakhs under specific conditions. Additionally, pension benefits are taxable, but there are exemptions for certain portions, especially if you receive a pension from the government.

New Tax Regime
The new income tax regime offers a streamlined way to pay taxes, with lower tax rates and no need for managing complex exemptions and deductions. While it might not suit everyone, it is a great option for those who don’t have substantial tax-saving investments or expenses. If you fall into this category, you can save both time and money by opting for the new regime. However, if you’re keen on maximizing your tax savings through investments, the old tax regime might still work better for you.

Ultimately, choosing between the two regimes requires careful consideration of your income, investments, and financial goals. By assessing your individual situation, you can make an informed decision that helps you reduce your tax burden and optimize your finances.