Planning to save tax will certainly be one of the key objectives for any person and particularly this time of the year should be ideal for taking any such measures. It is certainly, not prudent to wait till the fag end of the financial year to think about saving tax given that we may tend to miss and realise later by which time, it may not be possible to do any planning.

Some may look at it as over cautious and some may feel that it is too early. But if it comes to income tax and tax planning, it may never be early and it is a proven fact that earlier the planning better will be the saving of time and money.

It is a general belief that significant tax planning is not possible if it comes to personal tax. However, there are still avenues to explore which will minimise the tax burden effectively. Another popular belief, once it comes to tax planning, is that you need to actually spend money for availing deductions from income which will result in tax saving.

Basically, tax saving can be achieved by two ways - by spending and by investing. The Income-tax Act has many provisions to provide the benefit of exemption or deduction of income based on the payments/ expenditure you incur as well as the saving/ investment that you make. For example, it may be an insurance premium and payment of school fee or deposits in tax saving funds and contribution to Provident Fund.

Though, some taxpayers may form an opinion that the expenditure or investment in relation to tax planning may not match with the tax benefits, it may not be true and further should be seen differently.

It is a known fact that certain payments/ expenses like medical insurance premium, cost of treatment for specified diseases, donations to specified funds/ charitable institutions are in the nature of expenses which allows the taxpayer to claim a deduction from the taxable income. However, there are other investment modes too to avail the benefit of income tax deduction.

Some of the investment options available under the popular Section 80C of Income Tax Act are contribution to Public Provident Fund, post office savings schemes, investment in mutual funds etc. Even the deduction towards repayment of principal on housing loan could be considered under this category since it comes out of the investment in a house property. There is a dual benefit in case of investment in house property by availing a loan.

In addition to the deduction under Section 80C of Income Tax Act towards principal repayment, deduction of interest on such loan from income from house property is also possible. Further in case of a situation where the interest paid is more than the rental income (including 'Nil' income in case of self-occupied property), it is possible to set off against salary income reducing the overall tax burden.

As per the recent Budget (relevant for the financial year 2013-14), an additional deduction of Rs. 100,000 is allowed while calculating the taxable income subject to certain conditions. That is, the value of the house property should be less than Rs. 40,00,000 and the quantum of loan for such property should be less than Rs, 25,00,000.