‘Tax’ a word that brings stress to the taxpayers. It is a compulsory contribution, imposed by the state government on the working crowd. They are taxed according to the income they receive. It can be any income, which includes salary, income from a business, or house property. People get irritated paying tax because, they have worked really hard to earn their money, and from what they get, part of it goes to the Govt. Some people don’t even realize that their 2 to 3 month’s salary goes into paying taxes.
Now let us talk about what is the other option available to save this tax being paid. The Govt may have made this contribution compulsory, but they have also provided us with tax-saving tools. That’s another thing, most of the working crowd are still not aware of these tools, which results in the frustration of paying tax.
Tax is vast and very complicated to understand. So even though they use the basic deductions, a huge chunk of their income still gets cut. This is because they are not aware of the other saving tools available. Only professionals in this field will be able to help you out. Tax planning is very important, as it allows you to take more of your hard-earned money home. Those falling under the 5% tax bracket, do not have to work much on their tax planning as they can easily bring it down to nil. Those in the 20% or 30% tax bracket need advanced tax planning since a huge amount must be getting cut.
Related article : New Tax Regime Vs Old Tax Regime -Which one should you opt for?
Let us see few tax planning tools other that of section 80C:
Hindu Undivided Family
Famously known as HUF, is a great tool for tax planning. All the members can transfer their income except salary income to the HUF account. A HUF when created also enjoys the same exemptions and deductions as that of an individual. For married couples, if either the husband or wife has an ancestral property that generates rental income, they can transfer this income to the HUF account and it will be taxed as the income of HUF. However, it’s not the same in the case of, a person buying a property, and income generated from that, if transferred to the HUF, will be added to the person’s income and taxed accordingly, it will not be treated as income from HUF. But the rental income once transferred can be invested in tax-saving tools.
People with housing loans can take the benefit of Rs.200000/- under section 80C. For the interest amount, there are 2 situations, one is self-occupied where the person gets the deduction up to 2 lakhs and if it is taken in joint names of the husband and wife, then 4 lakhs. In the second situation, in the case of a let-out property or deemed to be let out, there is no limit to the deduction. However, in one year a maximum of 2 lacs only can be claimed as a deduction. Anything over it can be carried forward to the next year for up to 8 years.
In an education loan, the interest amount available for deduction is unlimited. This deduction is allowed for seven years. It can be for any further studies after passing Senior Secondary Education. The loan is available for deduction even if taken in the spouse or children’s name. This comes under section 80E.
This comes under the deduction 80D. For an individual the limit is up to 25000/- and for senior citizens above 60 years of age, the limit is 50000/-. So an individual can claim his amount and if he takes mediclaim in his parent’s name, who are above 60, he can get a total benefit of 75000/-.
Expenses Incurred On Medical Treatment
This deduction comes under section 80DDB. He can take the benefit for the specified diseases for himself, his spouse, children, parents, brothers, and sisters. The maximum deduction is up to Rs. 40000/- and for senior citizens, it is up to Rs. 100000/-. If you have taken a policy, worth Rs. 150000/-, and your medical bills have actually come up to 2 lakhs, then you will get the benefit on only Rs. 50000/-, i.e. (200000 – 150000 = 50000). To avail of this benefit, bills and a certificate from the specialist are required.
Any donation or charity made to any NGO, political parties and trust can be claimed under section 80G. The maximum deduction is 10% of your gross total income.
Invest In Spouse’s Name
Any surplus income can be invested in the house property, PPF, mutual funds, and equity. To invest in house property in the spouse’s name, you can lend her the money and she can give you her jewelry in exchange. In case the individual is not married but engaged, and if his fiancé does not have any taxable income or pays tax at a lower rate, then he can transfer the surplus income to her and it won’t be taxed as his income, as in the case of a married couple.
Invest In Mom’s And Dad’s Name
If you have surplus income, you can invest in their name. When money is transferred to parents, there is no clubbing of provisions. You can transfer any amount. There is no limit as such. So, these are the other tax-saving tools that a person can use if he/she has exhausted the deduction under section 80C. If it is too complicated to understand, then it’s better to seek help from a tax professional.
A financial planning platform where you can plan all your goals, cash flows, expenses management, etc., which provides you advisory on the go. Unbiased and with uttermost data security, create your Financial Planning without any cost on: http://bit.ly/Robo-Fintoo
Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.