Tax Avoidance

Tax avoidance is a way to use legal methods to lower the tax liability. This is an act in which a single tax regime in a single territory is used for individual benefits to lower the tax burden. It is a legal act that is encouraged by the government to promote more savings. 

Tax avoidance is an unfair activity of taking advantage of the shortcomings of tax rules and avoiding tax payments within the limits of the tax law. 

What are the types of Tax Avoidance?

There are 3 different types of Tax avoidance: 

1. Standard Deduction: Every salaried person living in India is eligible for a standard deduction from their income. This helps to reduce overall burdens. 
2. Retirement Savings: people who are invested in the PPF and NPS are eligible for the deductions under section 80C and 80CCD(1B). They also promote long-term savings and reduce current taxable income. 
3. Workplace Expenses: Employers provide exemptions, like HRA and LTA on the house rents, professional fees, and business travel, and reduce the taxable income if claimed. 

Common Tax avoidance strategies in India? 

Here are some of the strategies by which you can avoid tax in India using these deductions given below: 

• Section 80C: where you can avoid tax up to 1.5 lakh through the PPF, EPF, ELSS, and life insurance. 
• Section 80D: Through Medical insurance premiums. 
• Section 80CCD(1B): Deductions through the NPS. 
• Section 80G: via charitable donations.
• Section 24B( home loan interest): Deduction on house loan interest.