- July 8, 2017
- Posted by: aditya aditya
- Category: Finance & accounting
7 Ways to Save Tax
You don’t have to lie about your money. There are plenty of ways to save tax.
Here are 7 legitimate ways to save tax.
Retirement Plan – This is one of the basic steps that one should always follow and can be extremely tax efficient. Beef up your pension plans, to not only save taxes but secures your future too. For example, if you earn 1,000,000 INR a year and pay an extra 50,000 INR a year to your pension plan, then only 950,000 INR will be considered as the taxable amount. Sir, you just saved yourself an amount of 15,000 INR on income tax.
Insurance – This has been one of the most commonly used tax saving options. Whilst there are various types of life insurance, health insurance schemes and policies. For example, term life insurance, investment oriented insurance policies, health insurance etc. However, Health Insurance and Life Insurance are entirely two different entities of investment. You can invest in such plans not only to save tax but to keep the future of your loved ones secure.
Timings – If you are expecting an expense that is going to be tax deductible, try to pay for it in the same financial year. For example, if you need to pay a debt in the next financial year let’s say in April. Instead, pay it in March because this way you get an extra month’s worth of interest to deduct in the current financial year.
Donation – Social contributions are tax-deductible. Most importantly, they don’t even have to be in cash. You can donate clothes, food, household items etc. For example, you can lower your tax bill if you receive a receipt authorised by the charity.
Declare Expenses – A Self-employed person can reduce their tax by claiming expenses on various legitimate amenities. Such as office, stationery, fuel, computer equipment, phone bills etc. Perhaps find a well-qualified accountant for such savings on taxes. If you must know, doing it yourself may end up costing you more than usual.
Tax efficient Investments – You can invest in a company by buying shares. This may give you relief to a certain extent on tax reduction. However, this can also be risky as there is a possibility that these investments might not turn out as bad investments. So think before you leap.
Seek advice from Tax Professional – In most cases, using a tax agent or accountant won’t save you a lot of time, it can also improve your tax refunds. Little mistakes can also cause a loss of the savings. So it is much advisable to hire an accountant and claim your returns wisely and efficiently.