How to Save Income Tax in 2024- 2025?

During the tax season, people run helter-skelter trying to save up whatever tax they can. Times like these can be very tricky, as finding the right instrument for saving tax is a challenge. An easier way to manage this is by using tax-saving investments effectively and achieving financial goals. They should help save tax and provide attractive returns on investments.

Life insurance in India can be very useful for tax planning because the policyholder is eligible for tax benefits under the Income Tax Act 1961. There are several investment options listed as eligible under Section 80C. You can claim the deduction from gross total income for the premium paid for your life insurance policy.

What is the Income Tax Slab?

Income Tax in India follows a tax slab system. Taxpayers’ income is categorized as ranges or slabs, and certain tax rates are assigned. This is a progressive taxation system where people earning more income are taxed at higher income tax slabs in proportion to their higher income.

By introducing income tax slabs in India, the Government of India aims to achieve a fair taxation system for all citizens. With this aim, the government periodically revises the tax slabs and announces amendments to the Union Budget.

What are the Best Ways to Save Tax Under Section 80C in 2024?

Section 80C of the Income Tax Act 1961 provides deductions from taxable income for certain specified investments and expenses. The maximum limit for deductions under Section 80C is ₹1.5 lakh per financial year.

Unit Linked Insurance Plans (ULIPs)

Unit Linked Insurance Plans, commonly known as ULIPs, have emerged as versatile financial instruments that seamlessly integrate life insurance and investment components. Offering policyholders, the dual benefits of protection and wealth creation, ULIPs have gained popularity for their flexibility and potential for returns.

Equity-Linked Savings Scheme (ELSS)

The Equity-Linked Savings Scheme (ELSS) is a compelling option for investors seeking a tax-efficient and wealth-building investment avenue. ELSS combines the potential for capital appreciation through equity investments with the added benefit of tax savings.

Public Provident Fund (PPF)

The PPF is a government-backed savings scheme established with the dual objective of encouraging savings among individuals and providing them with a reliable financial instrument for the long term. The scheme falls under the purview of the Ministry of Finance, Government of India.

National Savings Certificate (NSC)

The National Savings Certificate is a fixed-income investment instrument offered by the Indian government, designed to encourage small and mid-income investors to cultivate a habit of saving. It is accessible through post offices across the country, making it widely available to a diverse range of individuals.

Employee Provident Fund (EPF)

The Employee Provident Fund is a savings scheme created to help employees accumulate a financial reserve for their retirement. It is a contributory fund, with both employers and employees making regular contributions, thereby building a corpus over the course of the employee’s working years.

Senior Citizens Savings Scheme (SCSS)

The Senior Citizens Savings Scheme (SCSS), introduced by the Government of India, stands as a dedicated savings avenue designed to cater to the unique financial needs of senior citizens.

Fixed Deposit (FD)

A Fixed Deposit is a type of financial arrangement offered by banks and financial institutions, providing individuals with a secure means to grow their savings while earning a predetermined interest rate over a fixed period.

Wrapping Up

Smart tax planning involves a combination of strategic investments, deductions, and compliance with prevailing tax regulations. By exploring these ways to save income tax in the financial year 2023-2024, individuals and businesses can optimize their tax outlays while aligning with their financial goals. It is advisable to consult with tax professionals for personalized advice based on individual circumstances and the most recent tax regulations.

Key Takeaways

• Utilize home loan benefits, including deductions on principal repayment (Section 80C) and interest payments (Section 24), to maximize tax savings for homeowners.
• Contribute to the National Pension System (NPS) to avail additional deductions under Section 80CCD(1B) beyond the limits of Section 80C.
• Tax-Saving Fixed Deposits offer a fixed interest rate and a lock-in period of five years, qualifying for deductions under Section 80C.
• Invest in tax-efficient instruments like ELSS mutual funds, which offer potential returns and qualify for tax benefits under Section 80C.