7 ways to reduce your tax liability if you have multiple sources of income in India
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7 ways to reduce your tax liability if you have multiple sources of Income in India

Wed Apr 12 2023

If you have multiple sources of Income in India, you know that managing your tax liability can be daunting. With different income streams, tax deductions, and exemptions to consider, it's easy to feel overwhelmed by the tax system's complexity. However, reducing your tax liability is not as difficult as it may seem. There are several methods you can minimize your tax burden legally and efficiently.

In this blog, we will explore seven practical ways to reduce your tax liability if you have multiple sources of Income in India. From investing in tax-saving instruments to taking advantage of deductions and exemptions, we will cover everything you need to know to optimise your tax planning strategy. Whether you're a salaried employee, a freelancer, or a business owner, these tips will help you reduce your tax obligation and save more of your hard-earned money in your pocket.

So, if you're all set to take control of your taxes and reduce your tax liability, keep reading.

1.      Invest in Tax-Saving Tools:

Investing in tax-saving tools is one of the most convenient ways to reduce tax liability. Incorporating tax-saving instruments such as life insurance policies, mutual funds, and medical health plans into your savings plan, ultimately securing your future while saving on taxes.

Under the Income Tax Act (Section 80C), numerous investment options are available that provide tax deductions. Although these tools may not offer very high returns, they provide an attractive tax-saving opportunity that should not be overlooked.

2.      Claim Deductions:

It is essential to note that Section 80C offers several investment avenues, such as Provident Fund, Public Provident Fund, National Savings Certificate, Equity-Linked Savings Scheme, etc. These investment options help you save tax and provide long-term financial stability.

Therefore, as a taxpayer, it is imperative to understand the benefits of Section 80C and use these tax-saving tools to your advantage. By doing so, you can reduce your tax liability and simultaneously secure your financial future.

3.      Claim HRA:

As a salaried individual, you can claim tax exemptions if you receive a House Rent Allowance (HRA) under section 80GG. On the other hand, if you rent a property furnished or unfurnished, you can also claim tax deductions on the rent paid.

To avail of these benefits, you should ensure proper documentation of your rental agreement and rent receipts. Doing so can reduce your taxable income and effectively manage your finances.

4.      Use Section 80DDB:
According to the guidelines under Section 80DDB, if a HUF or an individual has some incurring medical expenses for treating an ailment or specified disease, such costs can be claimed for tax deductions. However, these expenses can only be claimed by HUF or an individual; any corporate or other such entities are not qualified for such exemptions.

5.      Split Income with family members:

As a young entrepreneur or someone with multiple sources of Income, there are various legitimate ways to minimise your tax liability. One of these methods is to distribute your income among family members or to hire them for significant positions in your company.

By doing so, you can take advantage of tax benefits including increased deductions. However, primarily note that these practices must be executed within the framework of tax laws and regulations.

6.      Use Section 80TTA for interest income:

As per section 80 TTA, you can claim a tax deduction of up to Rs.10,000 on the interest earned. However, the interest earned must be from your savings bank account, savings banks account with a cooperative society engaged in bank activities, or interest earned from savings in the post office.

7.      Invest in Property:

Under Section 80C, you can take the benefit of up to Rs.1.5 lakhs in registration and stamp duty charges are paid when residential properties are purchased. These benefits can be claimed at any time throughout the year of payment. And the best part is loan deducted or acquired plays no relevant role here.

8.      LTA (Leave Travel Allowance) Exemption:

As per the LTA Exemption rules, an employee is permitted to avail of tax exemptions for a trip within India. This exemption applies on the shortest distance the employee travels on a trip.

Also, the trips must be taken only with your parents, children, or spouse to claim LTA exemptions. You can opt for tax exemptions from your employer on incurring expenses and submission of the bills.

Conclusion:

In conclusion, managing your tax liability when you have multiple sources of income in India requires careful planning and knowledge of the tax system. However, by utilising the seven strategies discussed in this blog, you can minimise your tax burden and maximise your savings.

Remember to take advantage of tax-saving investments mentioned in Section 80C and keep track of your deductions and exemptions. Also, maintain accurate records of your income and expenses to file your taxes and avoid discrepancies easily.

Rhea Tripathy

byRhea Tripathy

Meet Rhea Tripathy, a word wizard with a pen in one hand and a paintbrush in the other. By day, she slays as a content writer and by night, she indulges in her artistic passion. With a keen eye for the markets and a knack for literature, this certified trader brings her sharp mind and creative flair to everything she does. When she's not crafting clever content, you'll find her analyzing the latest market trends or getting lost in a good book.

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