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The Indian Income Tax Act allows for certain deductions which can be claimed to save taxes by all classes of Taxpayers ( Salaried Individuals, Professionals, Businessmen etc. ).
Govt allows certain deductions provided the amount saved is invested in the Instruments say Life Insurance Premiums, Employees Provident Fund/GPF, Public Provident Fund, National Savings Certificate, Repayment of Housing Loan, Equity Linked Saving Scheme of Mutual Funds, Tuition Fees including admission fees of college fees.
If you’ve done proper tax planning during the year, you can claim these deductions to save tax by investing under any of these sections alone or in combination but the total deduction allowed would be limited to Rs. 1,50,000 only.
The Income Tax Act also allows for deductions to save tax if the expenditure has been made by the taxpayer for insuring his own health or the health of his relatives. Different amount of deductions are allowed under each of these sections which help in tax saving depending on the type of Insurance Policy which is as follows:
Section 80D: Medical Insurance Premium of Self or Spouse or Children Section
80DD: Medical Treatment of Handicapped Dependents Section
80DDB: Treatment of Specified Diseases
If you have taken a Home Loan, you are allowed to claim deduction for repayment of principal amount of home loan u/s 80C.
Moreover, you are also allowed to claim deduction of interest paid on home loan under section 24. The maximum deduction allowed in some cases is Rs. 2,00,000 and in some cases there is no maximum limit of claiming this deduction for payment of interest on home loan.
If a taxpayer has taken an education loan for the higher education of himself or spouse or children or the student of whom he is the legal guardian, he can claim deduction under Section 80E and save taxes.
This deduction is only allowed for the repayment of interest and not for the repayment of principal amount of education loan. There is no maximum limit for claiming deduction under section for the repayment of interest on education loan. Deduction under Section 80E is only available for Individual taxpayers and not to HUF
If any Long Term Capital Gain is arising to a taxpayer from the sale of any Long Term Capital Asset, he can claim exemption from paying such Capital Gain Tax if he invests the amount of gain from sale of property in specified instruments. Any Asset is considered as a Long Term Capital Asset if that asset was held by the taxpayer for more than 3 years. This Exemption is considered very beneficial while doing the Tax Planning to save income tax of a taxpayer.
If a taxpayer makes a donation for charity, social or philantrophic purpose or makes a contribution towards National Relief Fund, then this donation can be claimed as a deduction u/s 80G of the Income Tax Act.
In some cases, 100% of the donation made is allowed to be claimed as a deduction whereas in certain cases only 50% of the donation made is allowed to be claimed as a deduction for the purpose of saving taxes.
To encourage the public to invest in equity shares and mutual funds, the govt has exempted income tax on the long term gains arising from the sale of equity shares, provided that these shares were held for a period of more than 1 year). If the shares are held for a period which is less than 1 year, tax would be levied @ 15%