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6 Strategies to Reduce Your Income Tax Liability for the FY 2023-24

The renowned proverb “A penny saved is a penny earned” emphasizes the importance of wise financial decisions. Tax planning stands out as a strategy to save money on taxes, ultimately contributing to an increase in income. The Income Tax Act offers deductions for various investments, savings, and expenditures made by taxpayers in a specific financial year. Here, we will explore some avenues that can assist in tax savings.

Investing in various products can enhance our quality of life but may also lead to financial distress. To alleviate this burden, the government provides income tax exemptions on direct taxes applied to the entire income.

  1. Home Loan Benefits under Section 80C:
    • Government programs like PMAY and DDR Housing Scheme aim to make housing more accessible.
    • Section 80C allows deductions up to 1.5 lakh for the annual income spent on repaying the principal amount.
    • Section 24(b) provides tax exemption on the interest portion of a home loan up to Rs 2 lakh per year.
    • If the newly purchased home is rented out, the entire interest component is exempt from annual income tax calculations.
    • Section 80EEA offers additional reductions for first-time homeowners.
  2. Health Insurance Policy:
    • Tax deductions under Section 80D can be claimed for the portion of annual taxable income spent on health insurance premium payments.
  3. Government Schemes:
    • Various government-mandated schemes like SCSS, SSY, NPS, and PPF offer high returns and tax waivers, with deductions up to Rs 1.5 lakh under Section 80C.
  4. Life Insurance Plans:
    • Premium payments under Section 80C and the sum assured received at maturity or early death under Section 10(10D) qualify for tax benefits.
    • For policies purchased after April 1, 2012, up to Rs 1.5 lakh in annual premiums can be claimed under Section 80C.
    • Policies bought before April 1, 2012, are eligible for Section 80C claims if total premium payments do not exceed 20% of the sum assured.
  5. Investment Options under Section 80C:
    • Popular tax-saving options under Section 80C include 5-Year Bank Fixed Deposit, PPF, National Savings Certificate, NPS, ELSS Funds, ULIP, SSY, and SCSS.
  6. Other Tax Saving Options:
    • Beyond Section 80C, additional deductions under Section 80 include health insurance premiums, home loan interest, charity contributions, and education loan interest.

Planning Your Tax-Saving Investments:

  • Begin planning at the start of the financial year to avoid rushed decisions.
  • Consider existing tax-saving expenses and deduct them from the Rs 1.5 lakh limit.
  • Choose investments based on goals and risk profile, such as ELSS funds, PPF, NPS, and fixed deposits.
  • Start investing in the first quarter to spread investments throughout the year and make informed decisions.

In summary, proactive tax planning through various avenues can lead to significant savings and increased financial well-being.


6 Strategies to Reduce Your Income Tax Liability for the FY 2023-24

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