21 Ways to Save Tax From Salary

You must pay special attention to the financial items that can reduce your tax liability if you want to save a sizable portion of your income in India. Sections 80C, 80CCC, and 80CCD in India allow salaried professionals to reduce their tax obligations.

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Likely, you have not planned your taxes adequately if you feel like you have been paying a significant portion of your income in taxes. There are many legitimate strategies to reduce your tax liability. The Income Tax Act of India enables citizens to reduce their tax obligations through deductions. When filing their tax returns, people can claim the deductions.

For Assesses, submitting an Income Tax Return (ITR) is a difficult process. Long documentation procedures, keeping track of numerous documents, and matching requirements compel people to make mistakes frequently.

How to Save Tax From Salary:

• Utilize Section 80C Deductions:
• Invest ₹1.5 lakh in a Public Provident Fund (PPF) account.
• Invest in Equity-Linked Savings Scheme (ELSS):
• Invest ₹1.5 lakh in ELSS funds like Axis Long Term Equity Fund to claim deductions under Section 80C.
• National Pension System (NPS) Deductions:
• Invest ₹50,000 in NPS Tier-I account to claim deductions under Section 80CCD(1B).
• Utilize House Rent Allowance (HRA):
• If you receive ₹20,000 HRA per month and pay ₹15,000 as rent, you can
• claim ₹60,000 as tax-free HRA.
• Home Loan Interest Deduction:
• Paying ₹3.5 lakh in home loan interest can help you claim deductions
• under Section 24(b).
• Education Loan Interest Deduction:
• Paying ₹50,000 in education loan interest can be claimed under Section 80E.
• Medical Insurance Premiums (Section 80D):
• Pay ₹20,000 for family health insurance to claim deductions under Section 80D.
• Donations to Charities (Section 80G):
• Donate ₹10,000 to a recognized charity and claim deductions under Section 80G.
• Children's Tuition Fees (Section 80C):
• Pay ₹1 lakh in tuition fees for your child's education and claim deductions under
• Section 80C.
• Utilize Section 80TTA for Savings Account Interest:
• Earn ₹10,000 as interest from your savings account, and ₹10,000 is exempt from tax under Section 80TTA.
• Invest in National Savings Certificate (NSC):
• Invest ₹1.5 lakh in NSC to claim deductions under Section 80C.
• Sukanya Samriddhi Yojana (Section 80C):
• Invest ₹1.5 lakh in your daughter's Sukanya Samriddhi Yojana account to avail deductions under Section 80C.
• Utilize Conveyance Allowance:
• Receive ₹1,600 per month as conveyance allowance, which is tax-exempt.
• Standard Deduction:
• Claim the standard deduction of ₹50,000 (as per the latest rules).
• Gratuity:
• Receive ₹10 lakh as gratuity upon retirement, which is tax-exempt up to a certain limit.
• Use Leave Travel Allowance (LTA):
• Utilize LTA for a family vacation to claim tax benefits on travel expenses.
• Transport Allowance:
• Receive ₹1,600 per month as transport allowance, which is tax-exempt.
• Invest in Tax-Free Bonds:
• Invest in government-approved tax-free bonds and earn tax-free interest income.
• Meal Coupons:
• Receive meal vouchers from your employer, which are tax-exempt up to ₹50 per meal.
• House Rent Allowance (HRA) for Living with Parents:
• Example: Pay ₹10,000 as rent to your parents and have them declare it as income to claim
• HRA benefits.
• Salary Restructuring:
• Opt for salary restructuring to include more tax-friendly components like reimbursements, allowances, and bonuses.

There are many other Ways to Save Tax From Salary. Contact For Further Advice.

Ways to Save Tax From Salary in the US:

Saving tax from your salary in the United States involves taking advantage of various deductions, credits, and tax-advantaged accounts. Here are 21 ways to save tax legally in the US:

Contribute to a 401(k) or 403(b): Contribute to your employer-sponsored retirement plan, such as a 401(k) or 403(b), to reduce your taxable income.

Open an Individual Retirement Account (IRA): Contribute to a Traditional IRA to deduct your contributions from your taxable income.

Health Savings Account (HSA): Contribute to an HSA if you have a high-deductible health plan to deduct contributions and use them for qualified medical expenses tax-free.

Flexible Spending Account (FSA): Use an FSA to pay for eligible medical and dependent care expenses with pre-tax dollars.

Childcare Tax Credit: Claim the Child and Dependent Care Credit to offset expenses related to child care.

Earned Income Tax Credit (EITC): If you qualify, this credit can provide substantial tax savings.

Education Credits: Utilize the American Opportunity Credit or Lifetime Learning Credit for eligible education expenses.

Mortgage Interest Deduction: Deduct mortgage interest if you own a home and itemize deductions.

Property Tax Deduction: Deduct property taxes paid on your primary residence.

State and Local Income Tax Deduction: If you itemize deductions, you can deduct state and local income taxes paid.

Home Office Deduction: If you have a home office for work, you may be eligible for a home office deduction.

Charitable Contributions: Deduct donations to eligible charitable organizations.

Investment Losses: Offset capital gains with capital losses from investments.

529 Plans: Contribute to a 529 plan to save for education expenses with tax-free growth.

Roth IRA Contributions: Although not deductible, Roth IRA contributions grow tax-free and can be withdrawn tax-free in retirement.

Tax-Efficient Investments: Invest in tax-efficient funds or stocks to minimize capital gains taxes.

Health Insurance Premiums: Deduct health insurance premiums if you're self-employed.

Energy-Efficient Home Improvements: Claim energy-efficient home improvement credits.

Mileage Deduction: Deduct mileage for work-related travel if not reimbursed by your employer.

Job-Related Expenses: Deduct unreimbursed job-related expenses if they exceed 2% of your adjusted gross income.

Filing Status: Choose your filing status carefully, as it can impact your tax liability.

Frequently Asked Questions on Saving Tax from Salary:

1. What are some common methods to save tax from salary?

• Contributing to Provident Fund (PF)
• Investing in Equity Linked Savings Schemes (ELSS)
• Utilizing tax-saving instruments like Public Provident Fund (PPF), National Pension Scheme (NPS), and Tax-saving Fixed Deposits (FDs)
• Availing deductions under Section 80C of the Income Tax Act, 1961

2. How does contributing to Provident Fund (PF) help in saving tax from salary?

• Contributions made towards PF are eligible for tax deduction under Section 80C of the Income Tax Act, up to a specified limit.
• The contribution limit for PF is up to 12% of the basic salary plus dearness allowance.
• The interest earned on PF contributions is also tax-exempt.

3. What are Equity Linked Savings Schemes (ELSS) and how do they aid in tax savings?

• ELSS are mutual funds that invest primarily in equity markets and have a lock-in period of three years.
• Investments in ELSS qualify for tax deduction under Section 80C, subject to a maximum limit of ₹1.5 lakhs.
• ELSS offers the potential for higher returns compared to traditional tax-saving instruments.

4. What is the significance of investing in tax-saving instruments like PPF, NPS, and Tax-saving FDs?

• Contributions to instruments like PPF, NPS, and Tax-saving FDs are eligible for tax deduction under Section 80C.
• These instruments offer a fixed return along with tax benefits, making them popular choices for tax planning.

5. How much tax deduction is available under Section 80C of the Income Tax Act?

• Section 80C allows a maximum deduction of ₹1.5 lakhs for investments made in specified tax-saving instruments.
• This includes contributions to PF, PPF, ELSS, NPS, Tax-saving FDs, among others.

6. Are there any other sections under the Income Tax Act that provide additional tax-saving opportunities for salaried individuals?

• Yes, apart from Section 80C, there are other sections like 80D (for health insurance premiums), 80E (for education loan interest), 80TTA (for savings account interest), etc., which provide additional avenues for tax savings.

7. What is the importance of tax planning for salaried individuals?

• Tax planning helps individuals optimize their tax liabilities by utilizing available deductions and exemptions effectively.
• It ensures compliance with tax laws while maximizing savings and investments.

8. Can I avail tax benefits on Home Loan repayments as a salaried individual?

• Yes, repayments towards the principal amount of a Home Loan are eligible for tax deduction under Section 80C, subject to the overall limit of ₹1.5 lakhs.
• Additionally, interest payments on Home Loans are eligible for deduction under Section 24(b) and Section 80EE, subject to certain conditions.

9. How can I maximize my tax savings as a salaried individual?

• Start tax planning early in the financial year to spread out investments and avoid last-minute rush.
• Diversify investments across various tax-saving instruments to optimize returns and risk.
• Keep track of changes in tax laws and utilize new opportunities for tax savings.

10. Is it advisable to seek professional assistance for tax planning?

• Depending on individual financial situations, seeking advice from tax professionals or financial advisors can be beneficial.
• They can provide personalized guidance, help in optimizing tax-saving strategies, and ensure compliance with tax laws.