Worried about tax planning? Here are 7 smart ways that women can save taxes. Invest at the start of the year to avoid last-minute tax-saving decisions that can leave you in mess.
Taxes are gender neutral. You earn money, you have to pay taxes. Every year there comes a time when most of us are concerned that our tax outgo is going to burn a hole in our pockets. With a host of tax-saving options available in the market, it’s easy to get lost and make wrong decisions.
So, if you’re worried about your taxes, then fret not! We’ll tell you smart and easy ways to save taxes and help you make an informed decision.
Sukanya Samridhi Yojana
If you have a girl child below 10 years, the Sukanya Samriddhi Scheme is a great way to save tax. The scheme comes with the exempt-exempt-exempt (EEE) status and provides a tax-free return. The annual contributions towards this scheme qualify for benefits under Section 80C and the maturity benefits are non-taxable.
You can open an account in any post office or designated branches of PSU banks with a minimum investment of Rs. 1,000 and maximum of Rs. 1.5 lakhs. You can make the deposits for 14 years and the account matures when the girl turns 21. However, you can withdraw up to 50% of the corpus after she turns 18.
Additional Reading: Changes In The Sukanya Samriddhi Yojana Scheme
Section 80D – Health Insurance
With the rising cost of healthcare, getting a good Health Insurance plan has become a necessity now. With the right health policy, you can not only minimise your healthcare expenses but also get tax savings.
Section 80D of the Income Tax Act allows you to claim a tax deduction of up to Rs. 25,000 per year for paying your Health Insurance premium with an additional deduction of Rs. 5000 for policies purchased by or for senior citizens. You can benefit not only from your own Health Insurance premium but also for premiums paid for your spouse, children and parents.
Section 80TTA – Savings Account
The interest you earn on your Savings Accounts in a bank, post office or a co-operative society is exempt from tax up to Rs. 10,000.
You can easily include the interest earned from this account in other income and claim a deduction on the total interest earned or Rs. 10,000, whichever is less. This is applicable for both an individual and an HUF.
Additional Reading: Top 5 Savings Account Schemes for Women
House Rent Allowance (HRA) is another smart tax-saving option you can make use of. If you are a salaried woman and lives in a rented house, you can claim HRA and bring down your taxes. The tax benefits that you get will depend on your basic salary, HRA provided by your employer, your place of residence and the amount of rent you pay.
If HRA is not a part of your salary, read this.
To find out how much HRA you are eligible for, you need to determine the below-mentioned amounts, and the least of these three is what you will be allowed to claim:
- HRA received from your employer
- 50% of your basic salary if you’re living in a metro city
- 40% of you basic salary if you’re living in a non-metro city
- Actual rent paid minus 10% of your salary
Let’s take an example. If your basic salary is Rs. 50,000 per month and you live with your family in a rented house in New Delhi and pay Rs. 15,000 per month as rent. In this case, your HRA would be the lower of Rs. 15,000 (actual HRA received), Rs. 25,000 (50% of your basic salary) or Rs. 1, 75,000 (excess of rent paid over 10% of your salary).
Therefore, in this case, only Rs. 15,000 per month will be allowed as HRA, for tax calculation purposes.
If you have made contributions to charitable organisations and relief funds, you can claim a tax exemption up to 50% of the amount if you have paid via cheque, draft or cash (not exceeding Rs. 10,000). Donations made to a few select organisations can also get you a 100% tax exemption.
If you have taken a loan for higher education after the completion of your Senior Secondary exam, then you can claim a tax deduction under Section 80E on the interest paid towards the loan.
So, if you apply for an Education Loan for higher education for yourself, your spouse, your children or any student for whom you are the local guardian, you can claim a deduction under this head of the Income Tax Act.
This deduction can be claimed for up to eight years or till the interest is paid, whichever is earlier. Also, there is no limit on the amount of interest you can claim for tax exemption.
Additional Reading: In Your 20s? Here’s How You Should Approach Tax Planning
If you have taken a Home Loan, then you can claim a tax deduction on the interest component of the loan under Section 24(b).
For self-occupied properties, you can benefit from deductions of up to Rs. 2, 00,000 under the head ‘Income from House Property’. However, to claim this, acquisition or construction of the property should be completed within five years from the end of the financial year in which the loan was taken. If not, the deduction will be limited to Rs. 30,000.
If you are a first-time buyer, you can claim an additional deduction of Rs. 50,000 if certain conditions are fulfilled.
Looking for a Home Loan? Check your eligibility here.
Additional Reading: Your Income Tax Exemption Guide For The Financial Year 2018-19
Now that you know about some of the Income Tax sections, don’t forget to assess your short-term and long-term financial goals and align them with your tax-saving options to get the best of both worlds.