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TAX PLANNING
TAX PLANNING
Tax planning in India involves strategic financial decisions and actions taken by individuals and businesses to minimize their tax liabilities within the legal framework. Effective tax planning can help optimize financial resources and maximize savings. Here are some key aspects of tax planning in India:
India has a progressive income tax system, where tax rates increase with higher income levels. Familiarizing yourself with the tax slabs and applicable rates is the first step in tax planning.
Take advantage of various deductions and exemptions available under the Income Tax Act. Common deductions include those for investments in specified instruments like Provident Fund (PF), Public Provident Fund (PPF), National Pension System (NPS), and Equity-Linked Savings Schemes (ELSS).
Under Section 80C of the Income Tax Act, individuals can claim deductions for various investments and expenses, including life insurance premiums, tuition fees, home loan principal repayment, and contributions to specified savings instruments.
Premiums paid for health insurance policies are eligible for deductions under Section 80D. This includes policies for self, family, and parents.
Deductions are available for both home loan interest (under Section 24) and principal repayment (under Section 80C) for self-occupied and rented properties.
Employees receiving HRA can claim exemptions on rent paid, subject to certain conditions. This can significantly reduce the taxable income.