It becomes increasingly important for people to efficiently prepare their taxes as the fiscal year goes on in order to guarantee the most possible savings. Tax preparation involves more than just lowering your taxable income; it also entails making wise financial choices. The following are the top 5 practical tax-saving tactics for 2025 that every Indian citizen ought to take into account:
1. Optimize Section 80C Benefits
You can deduct up to ₹1.5 lakh from your taxable income under Section 80C. The following are a few well-liked investment choices in this category:
- A long-term, risk-free investment with alluring returns is the Public Provident Fund (PPF).
- The Equity-Linked Savings Scheme (ELSS) offers tax-saving mutual funds with a three-year lock-in period and the possibility for better returns.
- A good option for cautious investors is the National Savings Certificate (NSC).
- Tax-saving fixed deposits have a five-year lock-in term but yield comparatively lower yields.
Useful Advice: Select investing options according to your financial objectives and risk tolerance.
2. Use Section 80D to Reduce the Cost of Health Insurance
Tax deductions are available for health insurance premiums for you, your spouse, your parents, and your kids:
- Up to ₹25,000 for dependent children, spouses, and oneself.
- If you are paying premiums for senior citizen parents, an extra ₹50,000.
Practical Advice: To get the most out of your health insurance, choose comprehensive policies that cover serious conditions.
3. Home Loan Claim Deductions
Significant tax advantages are available to homebuyers on both the principal and interest portions of their loans:
- Claim up to ₹1.5 lakh on the principal amount under Section 80C.
- Claim up to ₹2 lakh on the interest paid under Section 24(b).
- Under Section 80EEA, first-time homebuyers are eligible for an additional ₹150,000 deduction for interest paid on home loan (subject to restrictions).
Takeaway Advice: To claim these deductions, make sure you have the right paperwork, such as loan statements and payback receipts.
4. Make Use of NPS to Save for Retirement
The National Pension System (NPS) provides two advantages: tax savings and retirement preparation.
- Section 80C allows for a deduction of up to ₹1.5 lakh.
- Section 80CCD(1B) allows for an additional deduction of ₹50,000.
Takeaway Advice: Diversify your portfolio by holding government assets, corporate bonds, and stocks, and invest in NPS on a regular basis.
5. Benefit from Tax-Free Perquisites and Allowances
Your pay structure includes a number of tax-exempt elements, including:
- If you rent a home, you may be eligible for the House Rent Allowance (HRA).
- Domestic travel expenses are exempt from the Leave Travel Allowance (LTA).
- Standard Deduction: For salaried individuals, a fixed deduction of ₹75000.
- Takeaway Advice: Arrange your pay with your employer to maximize tax advantages.
Extra Advice
- Donations to Charitable Institutions: Under Section 80G, contributions made to qualified organizations are deductible.
- Education Loan Deductions: Section 80E allows for the deduction of interest paid on educational loans.
