What can I invest in to reduce my taxable income?

What can I invest in to reduce my taxable income?

Invest in Municipal Bonds.

Take Long-Term Capital Gains.

Start a Business.

Max Out Retirement Accounts.

Use a Health Savings Account.

Claim Tax Credits.

The Bottom Line.

How can I invest to save tax maximum?

Recommended ways of saving taxes under Sec 80C,80D and 80EE

1. Make an investment of Rs 1.5 lakh under Sec 80C to reduce your taxable income.
2. Buy Medical Insurance, maximum deduction allowed is Rs.
3. Claim deduction up to Rs 50,000 on Home Loan Interest under Section 80EE.

How much do I need to invest to avoid tax?

You have the standard deduction of Rs 50,000 per year. You will then have to deduct the eligible expenses and investments under Section 80C. Suppose you have invested Rs 1.5 lakh in an ELSS fund. The taxable income reduces to Rs 9,00,000 – Rs 50,000 – Rs 1,50,000 = Rs 7,00,000.

Do investments reduce taxable income?

If you’ve lost money on an investment, you may as well get a tax benefit from the security. You can deduct capital losses up to the amount of capital gains you have during the tax year. Either outcome will reduce your capital gains income, whether long-term or short-term, and that will lower your tax liability.

How can I reduce my taxable income in 2021?

6 Ways to Lower Your Taxable Income

1. Save for Retirement. Retirement savings are tax-deductible.
2. Buy tax-exempt bonds.
3. Utilize Flexible Spending Plans.
4. Use Business Deductions.
5. Give to Charity.
6. Pay Your Property Tax Early.
7. Defer Some Income Until Next Year.

How can I save tax on 12 lakhs?

Tax Deductions under Section 80(C)

1. Investments in PPF (Public Provident Fund)
2. Investments in EPF (Employee Provident Fund)
3. Investments in ELSS funds (Equity-Linked Savings Scheme)
4. Investments in NSC (National Savings Certificates)
5. Payment of premiums against Life Insurance Policies.