- Date : 18/05/2021
- Read: 4 mins
These eight easy tips can strengthen your financial planning and help you save substantially on income tax this year.
Women who work hard towards securing their financial future need to ensure that they are aware of various tax benefits available to them, in order to maximise the ROI on their hard-earned money and build long-term wealth. Read on for a list of eight investment tactics that can help reduce your tax liability.
1. Maximise deductions under Section 80C
Women can reduce their taxable income by Rs 1.5 lakh each year by investing in various savings instruments such as Equity Linked Savings Schemes (ELSS), 5-year tax saving deposits, Public Provident Fund, life insurance plans, National Savings Certificate, Sukanya Samriddhi Yojana, etc. These tax-saving investments offers varying returns and comes with a mandatory lock-in period, which can differ. So, the options should be carefully considered after evaluating your financial goals.
Other expenses such as tuition paid towards children’s education, stamp duty and principal repayment towards a home loan can also be claimed as a deduction under Section 80C.
Related: Save Tax under section 80C with these four expenditures
2. Contribute to the National Pension Scheme
To encourage savings for retirement, the government allows an additional deduction of Rs 50,000 over and above the 1.5 lakh under Section 80CCD(1B) for contributions made to the National Pension Scheme (NPS). However the additional tax exemption is only available once the entire amount under Section 80C has been exhausted.
3. Claim House Rent Allowance
Salaried women who are living in a leased premise can claim deductions on House Rent Allowance (HRA) under Section 10 (13A). The actual tax benefit will depend on your payable rent, basic salary, and HRA as specified in your annual salary break-up. Self-employed women can claim HRA as well, under Section 80GG. They have to submit Form 10BA while filing their IT returns.
Related: Can’t pay your rent? Here’s how to approach your landlord
4. Offset repayment for a home loan
Those who have purchased house property can claim different deductions towards repayment. A part of the principal settlement, stamp duty, and registration charges can be claimed under Section 80C along with other tax-saving options. Repayment of interest can be claimed up to Rs 2 lakh under Section 24. First-time home buyers can also claim an additional Rs 50,000 under Section 80EEE towards interest repayment, as long as the mortgage is under Rs 35 lakh.
5. Claim business expenses
Self-employed professionals, freelancers, and businesswomen can claim expenses towards food, travel, utilities, etc. to reduce their taxable income. Similarly, they can also claim depreciation on assets such as laptop, camera, vehicle etc. that is being used for business purposes.
Related: Government schemes that can help women entrepreneurs in India grow their small businesses
6. Save tax on repayment of education loan
If you are paying off an education loan for children, spouse, or self, you can claim a deduction on the interest component under Section 80E. The deduction can be claimed for eight years or till the loan is reimbursed, whichever is earlier. There is no limit on the amount you can claim; irrespective of the loan amount, the entire interest payment can be used as a deductible. Here are 7 Tips for a girl who wishes to repay her education loan.
7. Keep an eye on investment returns
Interest earned on savings account balance is exempt from tax up to a limit of Rs 10,000. This is the cumulative amount across all bank accounts you may have. Similarly, dividend received from shares or mutual fund investments is tax-exempt for the investor. Profit earned on sale of shares or mutual funds is exempt up to Rs 1 lakh. Long-term gains over and above this amount are taxable at 10%, whereas short-term gains are taxable as per your existing income tax slab.
8. Donate to charities and relief funds
Under Section 80G, donations made to charitable institutions recognised by the government are tax-deductible. There is no cap on the deduction as long as you have made the payment using cheque or demand draft. You can make cash donations too; however, the deduction is capped at Rs 2000 in this case. Look at these 6 Ways to make room for charity during the pandemic.
Women who work hard towards securing their financial future need to ensure that they are aware of various tax benefits available to them, in order to maximise the ROI on their hard-earned money and build long-term wealth. Read on for a list of eight investment tactics that can help reduce your tax liability.
1. Maximise deductions under Section 80C
Women can reduce their taxable income by Rs 1.5 lakh each year by investing in various savings instruments such as Equity Linked Savings Schemes (ELSS), 5-year tax saving deposits, Public Provident Fund, life insurance plans, National Savings Certificate, Sukanya Samriddhi Yojana, etc. These tax-saving investments offers varying returns and comes with a mandatory lock-in period, which can differ. So, the options should be carefully considered after evaluating your financial goals.
Other expenses such as tuition paid towards children’s education, stamp duty and principal repayment towards a home loan can also be claimed as a deduction under Section 80C.
Related: Save Tax under section 80C with these four expenditures
2. Contribute to the National Pension Scheme
To encourage savings for retirement, the government allows an additional deduction of Rs 50,000 over and above the 1.5 lakh under Section 80CCD(1B) for contributions made to the National Pension Scheme (NPS). However the additional tax exemption is only available once the entire amount under Section 80C has been exhausted.
3. Claim House Rent Allowance
Salaried women who are living in a leased premise can claim deductions on House Rent Allowance (HRA) under Section 10 (13A). The actual tax benefit will depend on your payable rent, basic salary, and HRA as specified in your annual salary break-up. Self-employed women can claim HRA as well, under Section 80GG. They have to submit Form 10BA while filing their IT returns.
Related: Can’t pay your rent? Here’s how to approach your landlord
4. Offset repayment for a home loan
Those who have purchased house property can claim different deductions towards repayment. A part of the principal settlement, stamp duty, and registration charges can be claimed under Section 80C along with other tax-saving options. Repayment of interest can be claimed up to Rs 2 lakh under Section 24. First-time home buyers can also claim an additional Rs 50,000 under Section 80EEE towards interest repayment, as long as the mortgage is under Rs 35 lakh.
5. Claim business expenses
Self-employed professionals, freelancers, and businesswomen can claim expenses towards food, travel, utilities, etc. to reduce their taxable income. Similarly, they can also claim depreciation on assets such as laptop, camera, vehicle etc. that is being used for business purposes.
Related: Government schemes that can help women entrepreneurs in India grow their small businesses
6. Save tax on repayment of education loan
If you are paying off an education loan for children, spouse, or self, you can claim a deduction on the interest component under Section 80E. The deduction can be claimed for eight years or till the loan is reimbursed, whichever is earlier. There is no limit on the amount you can claim; irrespective of the loan amount, the entire interest payment can be used as a deductible. Here are 7 Tips for a girl who wishes to repay her education loan.
7. Keep an eye on investment returns
Interest earned on savings account balance is exempt from tax up to a limit of Rs 10,000. This is the cumulative amount across all bank accounts you may have. Similarly, dividend received from shares or mutual fund investments is tax-exempt for the investor. Profit earned on sale of shares or mutual funds is exempt up to Rs 1 lakh. Long-term gains over and above this amount are taxable at 10%, whereas short-term gains are taxable as per your existing income tax slab.
8. Donate to charities and relief funds
Under Section 80G, donations made to charitable institutions recognised by the government are tax-deductible. There is no cap on the deduction as long as you have made the payment using cheque or demand draft. You can make cash donations too; however, the deduction is capped at Rs 2000 in this case. Look at these 6 Ways to make room for charity during the pandemic.
