All of us are well aware of the fact that evading or avoiding taxes is a crime, and it can invite serious consequences.
All of us are well aware of the fact that evading or avoiding taxes is a crime, and it can invite serious consequences. However, the first-time taxpayers who find it hard to get separated from their hard earned money can take help of various government schemes to reduce their tax liability. If your income is less than Rs. 10 lakh, your tax payment could reduce to zero through intelligent investments or it can be minimized so that doesn’t hit your pocket.
Here are the ways to pay zero tax:
Investments under Section 80C
An individual can save up to a maximum of Rs 1.5 lakh per year through investments under section 80C of the Income Tax Act. Some investment plans which fall under this act are premiums paid towards Life Insurance plan, repayment of the principal component of Home Loan, investments made towards PPF, NSC, ELSS, NPS, Tax saver FD, five-year post office time deposits, senior citizens savings scheme and Sukanya Samriddhi Scheme.
Health insurance premiums
The premiums paid on health insurance plans for yourself and family qualify for deductions under Section 80D. An individual can get a deduction of up to Rs 25,000 per year on Health Insurance premiums paid for himself and family. If you pay a premium for health insurance of dependent parents, you get additional Rs. 25,000. If your parents are senior citizens, the amount goes up to Rs. 30,000 a year. Thus, you can claim a total exemption of Rs. 55,000 a year if you pay a premium for self and parents who are senior citizens.
NPS for additional tax benefits
An individual gets an additional tax exemption if s/he invest in the National Pension Scheme (NPS). You enjoy a maximum deduction up to Rs. 1.5 Lakh a year under Section 80C. You also get an exemption over and above this under Section 80CCD(1B) up to Rs. 50,000 a year.
Rebate under Section 87A
You get a maximum rebate of Rs. 2,500 a year under Section 87A. You get this rebate only if your total income, less all deductions under Section 80, is equal to or less than Rs 3,50,000.
Tax benefits on donations
Apart from investments, people can also save tax via charitable deeds. Under Section 80G, donations to specific relief funds and charitable institutions qualify for tax deductions. You can claim up to 100% on the amount donated to specific relief funds, with or without any upper limit.
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