How to maximise your tax savings?

How to maximise your tax savings?

As tax season approaches, the first question on everyone’s mind is how to save tax. One of the easiest ways to save tax in India is claiming deductions on your income. By following these income tax saving tips, you can end up saving a significant amount of tax. Here are some ways to save tax in India.

How to save Income Tax in India using deductions:

Deductions are a reduction from your taxable income. There are several provisions of the Income Tax Act which help you reduce taxable income.

Section 80C:

This is by far the most popular section. It covers a wide range of investments and expenses that provide you ways to save tax. The deduction is limited to Rs. 1,50,000. Some of the investments you can make to save tax in India under Section 80C are:

• Public Provident Fund (PPF)
• Employee Provident Fund (EPF)
• Tax saving fixed deposit (FD)
• Equity Linked Saving Scheme (ELSS)
• National Savings Certificate (NSC)
• Senior Citizen Savings Scheme (SCSS)
• Principal repayment on home loan*
• Tuition fees for children
• Stamp duty and registration fees on the purchase of a house
• Sukanya Samriddhi Yojna (SSY)

Section 80CCC:

Investment in an annuity plan by Life Insurance Corporation (LIC) or any other insurer gets a deduction under this section. Together with Section 80C, you can claim a total deduction of Rs. 1,50,000.

• Section 80CCD
• Investment in the National Pension Scheme gets a deduction of Rs. 50,000

Section 80D:

The premiums you pay towards health insurance for yourself, spouse and dependent children are tax deductible. If you are under 60, you can claim a maximum deduction of Rs 25,000. If you are a senior citizen, you can claim a deduction of up to Rs 50,000. You can also claim an additional deduction for premiums you are paying towards your parents’ health insurance. If your parents are under 60, you can claim an additional deduction of Rs 25,000. If they are above 60, you can claim Rs 50,000 as a deduction.

Section 80DD/Section 80U:

These sections give a deduction for disability either to the person (80U) or for a person dependent on the taxpayer.

Section 80DDB:

If any money has been spent on treating specified disabilities, you can get a deduction between Rs. 40,000 to Rs.1,00,000 depending on the age of the person getting treated.

Section 80E:

Tax rebate on education loans are only valid up to eight years starting from the year you begin repaying the loan. If your loan tenure exceeds eight years, then you cannot claim a deduction for interest paid beyond the eight years. Note that if you repay the loan before the eight-year tenure, then tax deduction will be allowed for that period only.

Section 80G:

Amounts paid to charitable institutions etc. as donations get a deduction up to a certain limit depending on the charity you donate to.

Section 80GG:

- House rent allowance is part of your salary, and you can claim a deduction for HRA. However, if you pay rent, but do not receive HRA from your employer, you can claim deduction under Section 80GG towards the rent you pay.

Section 80GGA:

- Amounts paid for scientific research and development get a deduction of the amount paid.

Section 80TTA:

Interest on savings bank or post office account gets a deduction up to Rs. 10,000.

• This deduction is allowed on interest earned –
• From a savings account with a bank, co-operative bank or post office

Section 80TTB:

Interest on savings and fixed deposit accounts held by senior citizens in a bank, co-operative bank or post office gets a deduction of Rs. 50,000.

How to save tax in India using exemptions:

Another way to be tax efficient is to ensure you earn tax-exempt income

Dividend income from equities and mutual fund together is exempt up to Rs. 1 lakh (This is the aggregate amount of exemption for both equity and MF)

Interest on Public Provident Fund/Employee Provident Fund and withdrawals

Amounts received on life insurance policies (Link to last week’s Tax Thursday https://www.indianivesh.in/kb-blog/know-life-and-health-insurance-tax-benefits)

Allowances for salaried employees

By ensuring you make the right investments and are aware of the Income Tax rules, you can significantly save on your tax expenses.

Note: *Annual interest component of up to Rs. 2 lakh (Rs. 3 lakh for senior citizens) can be claimed as a deduction against income under Section 24 of the Income Tax Act