Reduce interest income by splitting income
If you are already having your salary income taxed, then you should reduce your liability further, if you have income from interest. This can be done by placing fixed deposits and other interest bearing securities in the name of your spouse.
Invest in parents name
If your parents do not have sizeable income, it's best to ask them to invest and receive your income. Remember that the basic tax exemption limit for senior citizens is higher at Rs 2.5 lakhs and they also receive higher interest on most fixed savings instruments like fixed deposits.
Pay parents rent if you stay in their house
If you stay in your parents house which is registered in their name, you can pay them rent and claim house rent allowance.
Look at tax free bonds
If you are in the 33 per cent tax, look at some listed tax free bonds. Interest from these bonds are tax free, which means they would not form part of your total income. The bonds listed on the National and Bombay Stock Exchange include those from National Highways Authority of India, REC, Indian Railways Finance Corporation.
Reduce tax liability by talking to employer
Certain perks are exempt from tax. You could avail of meal coupons and also travel allowance upto Rs 800 per month. This could reduce your tax liability. You would need to talk to your employer to see, how a break-up in your salary could help you.
Sell shares after holding for one year
If you are making a handsome profit on shares, it's better to sell the shares after one year. Remember selling shares before one year will increase your tax liability as you have to pay capital gains on profit, if you sell shares before one year.
Diversify your portfolio
You can reduce your tax liability by diversifying your portfolio. For example, if you have rental and interest income, you can put money into stocks. Dividend from shares do not attract tax and you can sell shares after a year, as they do not attract capital gains tax after one year. But, if you put money in fixed deposits, the interest income will attract tax.