Wealth Guide: 8 simple income tax hacks to help you save more money in taxes

Saving taxes are crucial to one's financial planning as it increases your income when done right. The government provides rebates and deductions on various instruments and schemes that help you save more money in taxes. However, many of us do not take advantage of available schemes and provisions while filing our income tax return, hence losing more money in taxes. It is very important that you plan your year in advance to take maximum advantage of the available schemes to maximize your income. 

It is more confusing for beginners as they tend to ignore available options to reduce tax burden and save more. "When you become eligible for paying tax, you deal with lot of confusion, worries, and a question in your mind - Why should I pay tax? Even the idea of paying a large part of your income as tax sounds horrific," says Amit Gupta, MD, SAG Infotech.  

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Taxpayers can take full advantage of deductions, exemptions, and rebates allowed by the Income Tax Act for various schemes and financial instruments to save taxes.  

"Financial measures taken to reduce taxes are considered tax planning, and it involves arranging your financial activities in a specific way that will help in tax saving," says Gupta.  

From deductions under Section 80 C, HRA to charitable donations, there are many ways one can save taxes. Here, SAG Infotech's MD Amit Gupta guides beginners to save more money through some simple tax-saving tips.  

Section 80C 

In order to encourage the citizens of the country to adopt the habit of saving more tax, the central government authorizes certain deductions on the amount invested in some distinct instruments under section 80C. Some of the popular tax-saving schemes are:  

●      Pension plans  

●      PPF accounts  

●      Equity mutual funds  

●      5-year tax-saving deposits  

●      Life insurance policies or term plans  

By investing wisely in these tax-saving schemes, you can achieve two goals, fulfilling financial goals and saving tax together. In this way, you can significantly reduce your taxable income and save more of your income.  

Components in Salary structure 

Most companies allow the restructuring of certain salary components to lower your tax liability. If you have a good relationship with your human resources (HR) department, talk to them about adding some allowances to your salary. 

You can avail the allowances like medical allowance, transport allowance, education allowance, and telephone expenses as part of your salary as they are not taxable. Additionally, go for food coupons instead of lunch allowance, as they are exempt from tax up to Rs.60,000 per annum. 

Add House Rent Allowance 

Employees usually get House Rent Allowance (HRA) in their income. If you do not have this component included in your salary, you can ask HRs to add it. If you live in a rented house and receive rent allowance from the employer, then you, as an employee, can claim exemption on HRA as per the Income Tax Act. 

Charitable donation 

Charitable contributions under section 80G are deductible up to 10% of your income. However, you should ensure that you get a receipt from the organization and a copy of their income tax exemption certificate rather than donating with no acknowledgment. If you can present donation receipts, then you are eligible for a tax deduction by donating to a noble cause.  

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)