Ways every working professional should ensure for tax saving

A working individual with an income can legally save upto Rs 1.5 lakhs per year just by being mindful about their investments and saving plans. Some special sections under Income Tax Act, 1961, provide various means of achieving tax benefits for the working population of the country. These are wise ways to save considerable amounts of money every earning individual ends up spending on taxes in every financial year. 

Some of the best tax saving plans have been mentioned herein: 

1. House Rent Allowance or HRA

Under S10 (13A) of Income Tax Act, 1961, you can be saved from paying some amount of the tax on House Rent Allowance or HRA by one of the three methods provided. This is exclusive to the individuals who do not live in a house they own, but on rent basis. This is also applicable to working individuals who live with their parents but want to pay them the rent. The amount that is exempted has to be calculated by any of the steps given in the section. 

2. Policy investments

If one invests in the various policies introduced by the government, then they can end up saving upto Rs. 1.5 Lakh per annum on taxes. For example, Public Provident Fund, Employee Provident Fund, National Savings Certificate, Sukanya Samriddhi Account, etc. are some of the accounts that will help you save money on taxes per annum. The government encourages people to participate in these schemes by paying high interest rates to ensure adequate savings. This is one of the best ways to maintain savings and acquire interests. 

3. National Pensions System or NPS-1

Having an NPS tier-1 account can help you save upto Rs. 50,000 on taxes in addition to the above-mentioned exemptions. This is a great way to think about your retirement and save money on it at the same time. This provision has been given under Section 80CCD (1B) of the Income Tax Act. The best part about this is that it is applicable to income earning as well as self-employed individuals.

4. Interest on loans exempted

The interest that you pay on education loans that you might have claimed for yourself; children or spouse attracts tax benefits under Section 24B. Education has always been encouraged in our country and for that reason, this section specially provides tax benefits to people who claim education loans. Additionally, upto Rs 2 Lakh interest paid on housing loan in a financial year has also been included in the deductions you can claim. On a home improvement loan, interest upto Rs 30,000 in a financial year can be claimed as deduction under this section as well.  

The techniques mentioned above can help a person save a considerable amount on the taxes he/she might be paying. These ways are in no way illegal and can be found in the Income Tax Act,1961. They are mere means of saving money but one should always consider the financial advice of a professional.