6 Uncommon Ways to Save Tax

There’s a famous saying. A rupee saved is a rupee earned. Why pay so much in taxes when you can save all your money with good tax planning? Yes, there are plenty of ways to save tax. There’s the famous Section 80C   and a number of investments which fall under them.

A conservative investor can invest in PPF, NSC, SCSS, Post Office Saving Schemes and a number of other investments to save tax under Section 80C up to Rs 1.5 Lakhs a year. If you are aggressive and fall in the higher tax brackets, you can invest in ELSS and save up to Rs 46,500 a year.

These are the common ways to save tax. Let’s take time to study some uncommon ways to save tax. Want to know more on Tax Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

6 Uncommon Ways to Save Tax

1. Donate and Save Tax

Donations to certain qualified charities can give you 50% to 100% tax exemption, on the amount donated. The deduction amount depends on the nature of donation. Certain charities enjoy 100% tax deduction under Section 80G of the income tax act.

There are a number of donations which enjoy tax deductions under Section 80G. The popular ones are National Defence Fund, the Prime Minister’s National Relief Fund, and the National Foundation for Communal Harmony.

You can donate to your favorite political party and save tax. Donate to a registered political party and claim a complete tax deduction under Section 80GGC on the donated amount. Don’t donate just to save tax. Believe in the ideals of the political party and then make the donation.

See Also: Have You Got the Income Tax Refund?

2. Pay rent to your parents

If you don’t own a home and are staying with parents you can claim HRA (House Rent Allowance) on your salary. Just show proof that you are paying rent to your parents each month. Don’t make the mistake of showing fake rent receipts. There are hefty penalties for the same.

3. Invest Through Parents

It’s easy to save tax if parents are senior citizens. If your parents are in the lower tax brackets you can easily save tax. All you must do is reroute investments from ELSS, fixed deposits or mutual funds.

Let’s say you have interest income of Rs 1 Lakh. Instead of adding this to taxable income in a particular financial year, do a tax-free transfer to senior citizen parents.  

Gifting parents is tax-free and they would reinvest in profitable investments. They could reinvest the amounts in SCSS (Senior Citizens Savings Schemes) and enjoy tax deduction under Section 80C.  You can reduce the tax liability and contribute to parent’s welfare.

See Also: Last Minute Tax Planning: What You Should Do?

4. Reinvest Profits

Let’s say you don’t have cash for fresh tax-saving investments. You can easily withdraw from existing investments and reinvest in tax-saving investments.

Let’s say you have locked in ELSS for 3 years or more. Just withdraw the amounts and invest in another ELSS Fund.

5. Pay Parents Health Insurance Premium

You can easily claim tax deduction for premiums paid on health insurance plans for self and family. Why not pay health insurance premiums for parents and also save tax. You get an additional deduction of Rs 25,000 a year. It’s Rs 50,000 a year if parents are senior citizens.

See Also: All You Must Know About Tax Planning

6. Save Tax By Creating an HUF

HUF (Hindu Undivided Family) saves taxes by creating a family unit. Any Hindu Family can create HUF and it’s taxed separately from members. Deductions like Section 80 and tax exemptions which are allowed under tax laws can be claimed separately.

Let’s say you and spouse and 2 children decide to create a HUF. Now, all 4 of you and the HUF can claim a deduction under Section 80C.

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