Imagine you earn ₹6,00,000 a year. After paying taxes, you’re left with only ₹4,80,000. But what if you could reduce your taxable income and pay less tax? With smart tax planning, this is possible! 

In India, you can reduce taxes legally with various strategies, even when taking an SBI personal loan.

1. Maximize Deductions Under Section 80C

Section 80C of the Income Tax Act lets you claim deductions up to ₹1.5 lakh through specific investments.

• PPF (Public Provident Fund): It’s a safe, long-term investment, and the interest is tax-free.
• ELSS (Equity-Linked Savings Scheme): A type of mutual fund where you can get tax benefits, and it has a 3-year lock-in period.
• NSC (National Savings Certificate): A government-backed scheme where you invest for a fixed period.

2. Claim Deductions on Home Loan Interest

If you have a home loan, you can claim a deduction of up to ₹1.5 lakh on the interest you pay under Section 24(b). 

Let’s say you pay ₹1.5 lakh as interest on your home loan this year. This ₹1.5 lakh will be deducted from your taxable income, meaning you’ll pay tax on a smaller amount.

Even if you use an SBI Personal Loan for home repairs or improvements, the interest may be deductible under certain conditions, giving you extra tax relief.

3. Claim Health Insurance Deductions

Health insurance is important for protecting yourself and your family. The good news is that premiums paid for health insurance are tax-deductible under Section 80D. If you are below 60 years, you can claim a maximum deduction of ₹25,000. For senior citizens, the limit goes up to ₹50,000.

For example, if you pay ₹ 20,000 for health insurance, you can deduct this amount from your income, which will lower your tax.

4. Invest in the National Pension System (NPS)

The National Pension System (NPS) is a government-backed retirement scheme. By investing in NPS, you can claim an extra ₹ 50,000 deduction under Section 80CCD(1B), beyond the ₹1.5 lakh limit of Section 80C.

So, by investing in NPS, you not only plan for your retirement but also save on tax.

5. Claim Deductions on Education Loans

If you have an education loan, you can claim a deduction on the interest paid under Section 80E, with no limit, making it beneficial for those with large education loan amounts.

This deduction will help you reduce your taxable income, especially if you or your family are pursuing higher education.

6. Donations to Charitable Organizations

Donating to charity is not only a good deed, but it can also help reduce your taxes. Under Section 80G, you can claim a deduction for donations made to registered charitable organizations. 

Depending on the charity, you can claim 100% or 50% of the donated amount as a deduction.

7. Smart Use of Personal Loans

An SBI personal loan won’t reduce taxes directly but can help pay debts or fund deductible investments.

For example, if you use the loan to invest in a PPF or an ELSS, the money you invest will be eligible for deductions under Section 80C.

Tax Deductions at a Glance

Here’s a table showing the different ways to reduce your tax burden with facts and figures:

Conclusion

Reducing your tax burden is simple. If you earn ₹6,00,000 and invest ₹1.5 lakh in PPF and pay ₹1.5 lakh in home loan interest, your taxable income drops to ₹3,00,000, reducing taxes.

By using smart tax-saving strategies, such as deductions for health insurance, education loans, and donations, you can legally reduce taxes and plan finances better. Whether repaying personal loans or investing, these tips help you save and stay financially secure.