5 WAYS TO ESCAPE INCOME TAX LEGALLY

Since taxes are an inevitable aspect of life, did you know that there are actually ways to lower your income tax liability and retain more of your hard-earned money in your pocket? Well let me tell you the 5 most appropriate ways to save taxes legally, yes you heard it right all the ways are Legal.

Here is the table given which defines the tax slabs for the financial year 2024-25:

Save for retirement

Start employing a diversified retirement plan to safeguard your income. You can contribute to a variety of retirement account types, each with its own set of guidelines and advantages. The most common are:

Employers provide 401(k) accounts, which let you make pre-tax contributions and lower your taxable income. Contributions are frequently matched by employers, which is like getting free money.

Account for Individual Retirement (IRA): IRAs are available in two varieties to anyone with earned income traditional and Roth. You may be able to reduce your taxable income for the year by making tax-deductible contributions to a Traditional IRA.
Roth IRA: Earnings grow tax-free, and withdrawals taken during retirement are also tax-free. Contributions are made with after-tax money, so they don’t immediately lower your taxable income.

Municipal bonds

States, towns, counties, and other governmental organizations issue municipal bonds, which are debt securities, to finance public works initiatives like hospitals, schools, and roads. There are two types of bonds:

• General Obligation Bonds
• Revenue Bonds

The majority of municipal bonds offer interest income that is free from federal income tax. This income may also be excluded from state and local taxes if you invest in municipal bonds issued by your state or local government. Municipal bonds are a very alluring investment because of their triple tax exemption, particularly for individuals in higher tax rates.

Health insurance

Under Section 80D, individuals can deduct from their taxable income the amount of money they pay in premiums each year. Certain amounts are not included in these income tax calculations, depending on the insured person’s age.

Invest in Government securities

There are a number of government securities who help you to save taxes on total annual income mentioned under section 80C of income tax act.

• Public Provident Fund
• Senior Citizen Savings Scheme
• Sukanya Samriddhi Yojana

Donations/ Charity

Under section 80G certain provisions are outlined regarding the deduction of charitable contributions. You can deduct up to Rs. 2,000 from your taxes if you give cash to a qualified charitable organization. However, as stated in section 80G on the donation, contributions made to the same through bank transfers, checks, demand drafts, etc., may be eligible for a deduction of up to 100% or 50%, with or without restrictions.