Smart Ways to Save Tax Ahead of Budget 2024
Leveraging these tax-saving avenues not only secures your finances but also aligns with smart financial planning practices.
New Delhi: The presentation of Budget 2024 on July 23rd is much awaited. Questions abound regarding potential changes in income tax regulations. Will tax exemptions increase? In which tax categories will exemptions apply? These queries will only find answers when Finance Minister Nirmala Sitharaman delivers her budget speech.
Amidst this anticipation, understanding ways to save on income tax remains crucial for financial planning in the upcoming fiscal year 2024-25. Here are five effective strategies to consider:
1. Section 80C:
Undoubtedly the most popular avenue for tax savings, Section 80C of the Income Tax Act allows deductions of up to ₹1.5 lakh. Investments in schemes such as Employee Provident Fund (EPF), Public Provident Fund (PPF), Life Insurance, Equity Linked Savings Scheme (ELSS), and Tax Saving Fixed Deposits (FDs) qualify under this section. ELSS stands out with a minimum lock-in period of just 3 years.
2. Section 80D:
By purchasing health insurance policies, you can save on taxes under Section 80D. Deductions of up to ₹25,000 can be claimed for yourself, your spouse, and dependent children. For senior citizens, this limit extends to ₹50,000. Families with both parents classified as senior citizens can claim up to ₹1 lakh annually on health insurance premiums.
3. Home Loan Benefits (Section 24 and 80C):
Taking a home loan for buying or constructing a house also helps in saving income tax. Section 24 offers deductions up to ₹2 lakh on interest paid for self-occupied properties, while there is no limit on deductions for let-out properties. Additionally, principal repayment of home loans qualifies for deductions under Section 80C.
4. HRA (House Rent Allowance):
Employees receiving HRA can claim tax exemptions under Section 10 (13A) if they rent a house and receive HRA as part of their salary package. Conditions apply based on the actual HRA received and salary components.
5. National Pension System (NPS):
Contributing to NPS offers tax benefits under Section 80CCD. Individuals can claim deductions up to 10% of their salary plus dearness allowance under Section 80CCD (1). Further, an additional deduction of ₹50,000 is available under Section 80CCD (1B), making NPS an attractive option for long-term tax planning.
These strategies not only help in reducing taxable income but also ensure prudent financial management aligned with your long-term goals. Whether or not Budget 2024 introduces new tax reliefs, being informed and proactive about tax-saving measures is essential to optimize your financial health.
By implementing these strategies wisely, taxpayers, especially those in higher tax brackets, can potentially save substantial amounts on their tax bills. Stay prepared and informed to make the most of your financial planning in the upcoming fiscal year.
In conclusion, leveraging these tax-saving avenues not only secures your finances but also aligns with smart financial planning practices. As Budget 2024 is nearing, staying proactive in tax planning will ensure you navigate potential changes effectively and maximize your savings.