Tax planning refers to reducing the amount that you pay taxes and it is usually a process that begins from the day that you start receiving your income. There are several ideas that you can use to plan your taxes efficiently and our aim today is to discuss these ideas. Before we begin it is important to know that these ideas can be implemented only if all your tax filings have been done properly and systematically. Here are a few ideas that you didn’t know about.
- Invest in Mutual Funds
Our law in India allows us to invest in our savings and it tries to promote the savings culture in the country. This can be used as a method to plan your taxes. Mutual funds are a great tool for starting off your savings and investing in mutual funds will help you plan your taxes efficiently. Tax planning using this method is legal under section 80C, 80CCC, and 80CCD of Indian law and you may save up to Rs1.5 lakhs legally.
- Invest In Pension Plans
Pension plan investments are both legal as well as necessary. Thus, they are a great tool for tax planning. Investment in pension plans as a method of saving is also supported by the section 80C, 80CCC and 80CCD of the Indian Tax Act and this method too will allow you to save up to Rs1 lakh legally.
- through a home loan
If you have a home loan that hasn’t been repaid yet, this is a great tool for you to plan your taxes. You will be able to make deductions from your taxes for repaying the principal amount of your home loan. This is a legal method as it comes under Section 80C and 24 of the Indian Tax Act. You may be able to make deductions of up to Rs2 lakhs and in some cases, there is no such upper limit fixed. This tax benefit though is allowed only after construction of your house is complete.
- through an Educational Loan
If you have taken a loan for educating yourself, your spouse or your children you will be eligible to claim deductions from your tax under Section 80E of the Indian Tax Act. This deduction is valid for repaying the interest of an educational loan. It is valid from the time the taxpayer starts repaying the loan and up to 7 years succeeding that.
- Medical Insurances
Medical insurances either for yourself or your immediate family members are a good tool for tax planning. Medical insurances for specific diseases may also be used for this purpose.
- Life Insurance Policy
Investment in life insurance policies can guarantee you up to Rs1.5 lakh deduction claim. This tool is legal under the section 80C of the Indian Tax Act.
If you actively donate to charities and charitable causes, you will be eligible to claim a deduction for your taxes. The amount of deduction that you may claim depends on the type of donations that you make. In certain cases, you may claim 100% of the donated amount as a tax deduction and in others, only a 50% claim is allowed.