Income Tax: The word ‘Income Tax’ comes to the mind of almost every taxpayer at one time or the other. However, the first thing we think of is how we can save maximum tax on our income. As a salaried individual, when one is in the highest tax slab, one has to pay a higher tax annually.
The word ‘Income Tax’ comes to the mind of almost every taxpayer at one time or the other. However, the first thing we think of is how we can save maximum tax on our income. As a working person, when one is in the highest tax slab, one has to pay much higher tax annually. However, taxpayers can save their tax by using some tricks. With many people having very little information about them, taxpayers often end up paying a large portion of their hard-earned money in taxes. If the calculations are done properly, if a person takes a home loan or avails the benefit of NPS from the company, it helps him in saving some money from tax.
How to save income tax?
1. An employee should avail benefits under the National Pension System under Section 80CCD(2), in which 10 percent of his basic salary will be contributed to NPS on his behalf and is completely tax-free. For example, if a company invests around Rs 5,000 in NPS every month, the tax will be reduced by around Rs 13,000.
2. Apart from this, taking home loan can help in reducing tax. For example, for a loan of Rs 25,00,000 for 20 years at an interest rate of 7 percent, he will have to pay an EMI of Rs 20,000 along with an annual interest of Rs 1.5 lakh. Taxpayers get tax benefits on the interest and principal paid on home loan.
3. Apart from this, you can get tax exemption on allowances like transport allowance and LTA.
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