Top Tax-Saving Strategies to Reduce Your Income Tax Legally
Want to save tax the smart and legal way? You’re not alone. Every taxpayer looks for ways to reduce their tax burden. Here’s a list of simple, effective, and legal tax-saving strategies under Indian tax laws.
✅ Save Tax Under Section 80C – Up to ₹1.5 Lakh
You can claim a maximum deduction of ₹1.5 lakh per financial year by investing in eligible instruments under Section 80C.
Popular 80C options:
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Employee Provident Fund (EPF)
- Tax-saving Fixed Deposits (5-year)
- Life Insurance Premiums
- Unit Linked Insurance Plans (ULIPs)
- National Pension Scheme (NPS)
- Tuition fees for children
- Principal repayment of a home loan
✅ Health Insurance Deductions Under Section 80D
You can claim tax benefits for premiums paid on health insurance:
- ₹25,000 for self, spouse, and children
- ₹50,000 for senior citizen parents
- Maximum benefit: ₹1,00,000 (if you and your parents are both senior citizens)
✅ Claim Home Loan Interest Under Section 24(b)
Paying a home loan? Claim interest deduction up to ₹2 lakh per year for self-occupied property.
For a rented-out property, there’s no upper limit on interest deduction. You can reduce your taxable income significantly.
✅ Education Loan Interest – Section 80E
If you’ve taken an education loan:
- Claim 100% of interest paid as deduction
- No limit on the amount
- Can be claimed for up to 8 years
✅ Extra NPS Deduction – Section 80CCD(1B)
NPS offers an additional deduction of ₹50,000 over and above the ₹1.5 lakh limit under 80C. That means you can claim ₹2 lakh in total if you invest in NPS.
It’s a smart way to plan for retirement while saving tax.
✅ Claim Rent Paid – Section 80GG
Don’t receive HRA but pay rent?
You can still claim rent under Section 80GG. The maximum deduction is:
- ₹5,000 per month or
- 25% of total income (whichever is lower)
Note: You must not own a house in your or your spouse’s name.
✅ Donations to Charity – Section 80G
Giving to charity also reduces your tax:
- 100% deduction for donations to specified funds (like PM CARES)
- 50% deduction for other approved organizations
Make sure the NGO is registered under Section 80G.
✅ Claim Home Loan Principal – Section 80C
Apart from interest, you can also claim the principal repayment of your home loan under Section 80C (up to ₹1.5 lakh).
✅ House Rent Allowance (HRA) Exemption – Section 10(13A)
If you get HRA and live in a rented house, you can claim a partial or full exemption on HRA.
The exemption depends on:
- Salary
- Rent paid
- City of residence (metro or non-metro)
- HRA received
✅ Capital Gains Exemptions – Sections 54 and 54F
Sold a property or asset? You can save tax on capital gains if:
- Section 54: Reinvest in another residential property (from residential sale)
- Section 54F: Reinvest in a house from sale of other long-term assets
This helps in deferring or avoiding long-term capital gains tax.
✅ Use Tax-Free Perks & Allowances
Structure your salary to include tax-free components like:
- Travel allowance
- Uniform or equipment allowance
- Food coupons
- Employer’s PF contribution
- Mobile and internet reimbursement
These allowances reduce taxable income without spending extra.
✅ Invest in ELSS & Equity Mutual Funds
ELSS (Equity Linked Savings Schemes) are tax-saving mutual funds under Section 80C.
They offer:
- High return potential
- Shortest lock-in (3 years) among 80C options
- Long-term capital gains over ₹1 lakh taxed at just 10%
✅ Split Income with Family (Legally)
Want to optimize taxes as a family?
- Invest in the name of a non-earning spouse or children
- Transfer funds to a Hindu Undivided Family (HUF)
- Use minor’s income exemption up to ₹1,500 per child
Avoid clubbing provisions by investing in tax-free instruments.
🧾 Conclusion: Start Your Tax Planning Early
You don’t need to wait until March to save on taxes. The earlier you start, the more you save — legally.
These strategies are available to all taxpayers. But if you’re unsure where to start or want personalized advice, let EzyMoneyDeals guide you.
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