Paying taxes is an unavoidable part of life, but that doesn’t mean you have to pay more than necessary. With careful planning and smart decisions, you can save money on your taxes and keep more of your hard-earned salary. Here are five ways how to save tax on salary:
- Invest in tax-saving instruments
One of the most common ways to answer how to save tax on salary is to invest in tax-saving instruments such as Public Provident Fund (PPF), National Pension System (NPS), and Equity-Linked Savings Scheme (ELSS). These investments offer tax benefits under Section 80C of the Income Tax Act, which allows you to claim deductions up to Rs. 1.5 lakh from your taxable income.
By investing in these instruments, you not only save taxes but also earn returns on your investments, which can help you build wealth over time.
- Claim deductions for expenses
Another way to save tax on salary is to claim deductions for expenses such as rent, medical expenses, and education expenses. Under Section 80D, you can claim deductions for medical insurance premiums paid for yourself and your family members. Similarly, under Section 80GG, you can claim deductions for rent paid if you do not receive a house rent allowance (HRA) from your employer.
Additionally, if you have taken an education loan for yourself or your dependent, you can claim deductions under Section 80E for the interest paid on the loan.
- Utilize HRA and LTA
If you receive HRA from your employer, you can claim deductions for rent paid under Section 10(13A) of the Income Tax Act. This can be a significant tax-saving opportunity, especially if you live in rented accommodation in a metro city where the cost of living is high.
Similarly, if you receive Leave Travel Allowance (LTA) from your employer, you can claim deductions for travel expenses under Section 10(5) of the Income Tax Act. This can be a great way to save tax on your salary while enjoying a vacation with your family.
- Opt for the new tax regime
The government introduced a new tax regime in the 2020 budget, which offers lower tax rates but eliminates most of the tax deductions and exemptions. If you are not able to claim significant deductions under the old tax regime, it may be beneficial to opt for the new tax regime and save tax on your salary.
Under the new tax regime, you can claim deductions for contributions made towards PPF, NPS, and other tax-saving instruments, but you will not be able to claim deductions for expenses such as rent and medical expenses.
- Consult a tax expert
If you are unsure about how to save tax on your salary, it’s always a good idea to consult a tax expert or a financial advisor. They can help you understand your tax liabilities and suggest tax-saving strategies that are most suitable for your financial situation.
In conclusion, how to save tax on salary was the main question of this article which we tried to answer most appropriately, revising all of it requires careful planning and smart decisions. By investing in tax-saving instruments, claiming deductions for expenses, utilizing HRA and LTA, opting for the new tax regime, and consulting a tax expert, you can save money on your taxes and keep more of your hard-earned salary in your pocket.
