How to Save Tax in India | Convey

How To Save Tax

4 Min Read |  April 16, 2021


The world is a cauldron of varying cultures, lifestyles, religions and beliefs tossed together with a pinch of salt. From the sunny plains of the south to the snowy peaks of the north, from the apple pies of the west to the dumplings of the east, it is a riot of colours, sounds and experiences. It is a veritable medley of polarising points of view.

In all this diversity, there is one common factor that unites all salaried employees. At least on one particular day of the year, each individual opens up their bank account statements and curses the government. 

Why this common animosity towards the system?

Elon Musk’s recent move from California to Texas is also a result of this same animosity. According to the Wall Street Journal, “Taking up residence in Texas comes with personal benefits for Mr Musk: The state doesn’t collect state income or capital gains tax for individuals.”

Tax is one common thread that connects the richest to the poorest – everyone bonds over their shared sorrows at having to pay a portion of their income to the government. No matter what your income is, no one likes just handing their money over. 

As William F Buckley said, “I would like to electrocute everyone who uses the word ‘fair’ in connection with income tax policies.”

The fact that everyone hates paying income tax is clear.

The question therefore is, how do you avoid paying income tax?

Of course, if you’re really keen on living on the edge, you would probably choose to not declare your income. However, considering the fact that it is illegal, I would not advise you to go down that road.

Instead, use the system to your advantage.

Exploit the various loopholes and exemptions to reduce your tax liability.

How to Save Income Tax?

There are several methods by which you can save your income tax.

Did you know that there are strategic ways to approach your investments by which you can reduce your tax liability?

Let’s take a look at the different methods. If you’d like to watch our video on the same, please click here.


Here, STCG stands for short term capital gains tax and LTCG stands for long term capital gains tax.

Short term in the case of assets refers to any asset that you hold for a period of less than one year. Long term, on the contrary, is any holding period that exceeds one year. This means, if you buy 100 Infosys shares and then sell them after 10 months, you will be taxed on the profit at the STCG rate. On the other hand, if you sell the shares after holding them for 18 months, you will be taxed on the profit at the LTCG rate.

Currently, the short-term capital gains tax rate in India is 15\\\%, and the long-term capital gains tax rate is 10\\\%. In fact, in the case of long-term gains, only profits exceeding Rs. 1 lakh are taxed. If the profit that you have earned is lower than Rs. 1 lakh, you will not have to pay any tax.

This difference in tax rates is especially relevant if you want to reduce your tax burden.

You should evaluate your portfolio before the end of the financial year and take stock of which companies you want to hold on to, and which companies you want to exit from.

The logic here is simple, wherever you are profitable, you should try to hold on for longer than a year. This ensures that you pay tax on your gains at 10\\\% and not 15\\\%.

The reverse applies to losses. In the case of losses, you can carry it forward up till 8 assessment years. This means, if you file IT returns in the years when you make a loss, you will be able to claim the adjustment later on.

Whenever you’re making losses, you should make sure to exit from the company before the completion of a year. This ensures that you will be able to claim maximum deductions on your income tax liability.

Fairly simple, isn’t it?

The crux of the matter here is to choose the lower tax bracket, always. Adjust your investment horizons accordingly to save income tax.

Health Insurance

The other method of saving income tax makes use of an extremely useful financial product – health insurance. 

It is important to mention here that health insurance is something you should always have – whether you claim the deductions or not. However, if you can benefit from an essential product, why wouldn’t you?

Section 80D of the Income Tax Act outlines certain exemptions that you can claim if you purchase health insurance for yourself and your loved ones. Under this section, you are eligible to receive deductions of up to Rs. 25,000 if you pay health insurance premiums for yourself and your family. 

In fact, if you are a senior citizen, the deduction limit increases to Rs. 50,000.

These exemptions were introduced as an incentivising mechanism for people to get health insurance. It still remains one of the best methods to save income tax.

In order to make your insurance journey as smooth and seamless as possible, check out Navi Health Insurance


The section above was dedicated to health insurance and Section 80D of the Income Tax Act. It should be noted, however, that there are also other investments that have specific tax benefits. Section 80C of the Income Tax Act outlines the various other expenditures and investments that you can undertake to reduce your income tax liability.

One of the best methods of saving income tax through investments is the ELSS. Also known as the Equity Linked Saving Schemes, these are mutual funds that invest the amount in growth companies for long-term appreciation purposes. The lock-in here is for 3 years and you can deduct the invested amount from your tax liability. Under this scheme, you can claim deductions of up to Rs. 1.5 lakhs.

In the same way, there are several other investment avenues that you can use to save income tax. For instance, Public Provident Fund (PPF), National Savings Certificate (NSC), Unit Linked Insurance Plans (ULIPs) are just some of the methods.


The fact remains that there are several methods by which you can reduce the amount of income tax that you have to pay. 

All the information is already present, the trick is to read between the lines to find out the optimal measures. 

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