How to save tax: While many individuals actively try to reduce their tax liability through common means, there are some lesser-known tax-saving techniques that are often overlooked. Proper tax planning is an ongoing process, and it’s vital to be aware of these strategies throughout the year. Let’s delve into some of these unique methods:
1. Gifts from Wedding Ceremonies: During weddings, the bride and groom receive a plethora of gifts, ranging from products to cash and cheques. While certain gifts could be taxable under different circumstances, gifts received during weddings are exempted under Section 56(2) of the Income Tax Act. This exemption allows you to avoid tax on these specific gifts.
2. Invest in the Name of Your Parents: In our country, senior citizens are entitled to special tax benefits. To reduce your taxable income, you can gift money to your parents. They can then invest this sum in the Senior Citizen Scheme or Senior Citizen Fixed Deposit to avail tax benefits.
3. Health Expenditures: Tax savings can also be claimed on medical expenses incurred for your parents. Under Section 80D, you’re eligible for deductions up to INR 25,000 on insurance premiums. If you’re paying for a medical insurance premium in your parents’ name, you can claim an additional deduction.
4. Charitable Donations: Making donations can also lead to tax savings. Depending on the nature and recipient of the donation, you might be eligible for deductions up to 100% or 50% of the donated amount. However, these deductions are only applicable for donations made via cheque or cash.
Remember, while it’s essential to make the most of these tax-saving opportunities, always ensure your actions align with the guidelines set by tax authorities. Proper documentation and understanding of rules can make your tax planning journey much smoother.