Guide For Tax Planning Strategies to Save Money

  • Home
  • Finance
  • Guide For Tax Planning Strategies to Save Money
Guide For Tax Planning Strategies to Save Money

If you think about it, the truth is that managing personal financials is only possible with planning on taxes. This can help taxpayers in reducing their tax liability and increase their savings through various tax-saving strategies. The article offers several suggestions on how taxpayers can save some taxes in India for salaried individuals at different income levels. Even when you earn over 10 lakhs, 20 lakhs, or 30 lakhs per annum, these hints will reduce your tax bill significantly.

Understanding the Basics of Tax Planning

Before we get into specific strategies, let’s first learn the basics of tax planning. Tax planning simply entails knowing where you stand financially so that you can take maximum advantage of the benefits brought about by taxation. It includes investment planning as well as retirement or even insurance purchases among other activities. All attempts should be made to ensure that all available options for saving tax are resorted to and hence cut short any negative impact taxes may have on an individual.

Income-Tax Act’s section 80C allows deductions up to ₹1.5 lakhs per annum. Some popular investment options under this section include:

Public Provident Fund (PPF): PPF is a long-term investment option that provides non-taxable returns. It gives a fixed interest rate and no taxation is done on its interest earned.


Tax Planning Strategies to Save Money in India 


1. Maximize Deductions Under Section 80C

Income-Tax Act’s section 80C allows deductions up to ₹1.5 lakhs per annum. Some popular investment options under this section include:

  • Public Provident Fund (PPF): PPF is a long-term investment option that provides non-taxable returns. It gives a fixed interest rate and no taxation is done on its interest earned.
  • Employee Provident Fund (EPF): Contributions made towards EPF are eligible for deduction also earn interest as well. While the employee contributes 12% of the basic salary plus dearness allowance towards EPF.
  • National Savings Certificate (NSC): An investment that is guaranteed yet still gives a fixed return. It is a savings bond designed mainly for low to middle-income earners who want to invest and save taxes.
  • Equity-Linked Saving Scheme (ELSS): Mutual funds that primarily invest in stocks and offer tax benefits. ELSS has a lock-in period of three years, and it provides the potential for higher returns due to equity exposure.
  • Sukanya Samriddhi Yojana (SSY): A government-supported saving scheme aimed at the welfare of girl child. High rate of interest; no tax on investment amount, interest earned, or maturity amount.


2. Utilize Section 80D for Health Insurance

Section 80D allows deductions for health insurance premiums paid by you for yourself, your spouse, children and parents as follows:

  • ₹25,000 for self, spouse & children
  • Additional ₹25,000 (₹50,000 in case of senior citizen parents) for parents
  • Preventive health check-up costs up to ₹5,000 shall be within such overall limit.


3. Invest in the National Pension System (NPS)

The National Pension System (NPS) is a government-backed retirement savings scheme. Contributions made towards NPS are eligible for tax deductions under Section 80CCD(1), 80CCD(1B), and 80CCD(2):

  • Up to ₹1.5 lakh under 80CCD(1) [within section 80C limit].
  • An additional ₹50 thousand under 80CCD(1B).

Employer’s contributions are deductible up to 10% of salary under 80CCD(2). NPS provides a long-term investment option for retirement with tax benefits and the potential for market-linked returns.

4. Home Loan Repayments

The repayment of the principal and the interest, both are eligible for tax deductions in a home loan.

  • Section 80C: Deduction up to ₹1.5 lakhs on principal repayment.
  • Section 24(b): Deduction up to ₹2 lakhs on interest repayments in respect of self-occupied house property.

If the property is rented out, the entire amount of interest on a home loan can be claimed as a deduction

5. Hidden Ways to Save Tax

Some other lesser-known ways to save taxes are:

  • Leave Travel Allowance (LTA): Exemption applies only within India. LTA can be availed twice in a block of four years for travel expenses incurred by employees and family.
  • House Rent Allowance (HRA): Exemption based on Rent paid, Basic Salary and City of Residence. HRA is exempted to the least among; actual HRA received or 50% of salary if living in metro city(40% for non-metro) or actual rent paid minus 10% of salary.
  • Interest from your Savings Accounts: Under Section 80TTA, individuals and Hindu Undivided Families (HUFs) can avail of exemptions up to ₹10,000

Tax Planning Strategies to Save Money from Salary

For salaried individuals, effective tax planning involves utilizing allowances, deductions, and exemptions. Here are some strategies:

Structure Your Salary Efficiently

Work with your employer to structure your salary in a tax-efficient manner. Components such as HRA, LTA, food coupons and car allowances can reduce taxable income

  • Food Coupons: The value should not exceed ₹2,200 per month.
  • Company Car: Tax impact changes with the cubic capacity of the vehicle and also fuel expense borne by the employer
  • Professional Development: This includes reimbursements for educational expenses related to professional development can be non-taxable.

Claim Professional Tax Deductions

Professional tax paid is deductible under Section 16 of the Income Tax Act. This deduction is straightforward but often overlooked.

Use Standard Deduction

A standard deduction of ₹50,000 is available to all salaried individuals, reducing taxable income directly.


Effective tax planning requires an exhaustive understanding of accessible deductions, exceptions, and venture choices. By leveraging these tax arranging techniques, salaried people in India can altogether diminish their tax liabilities, regardless of their pay level.

Whether your compensation is over ₹10 lakhs, ₹20 lakhs, or ₹30 lakhs, the key is to plan early, remain educated about charge laws, and make key investments. Execute these techniques to guarantee you make the foremost of your hard-earned cash while complying with charge controls. 

Effective tax planning not only makes a difference in diminishing your tax burden but also in building a secure budgetary future. Take advantage of all accessible tax-saving avenues and keep looking into your money-related plan regularly to adjust to any changes in tax laws and individual financial goals.

Leave a Reply

Your email address will not be published.