Every employed person is busy trying to save tax. He had expected a cut in the tax slab from Finance Minister Nirmala Sitharaman in the interim budget. However, there is still no need to be disappointed. Here are 10 Easy Income Tax Saving Tips through which you can save tax. Come, let us know about those methods here.
New Delhi: Every employed person wants to save tax. This is why they keep an eye on changes in tax slabs in the budget. The interim budget was no different. People were hopeful that Finance Minister Nirmala Sitharaman would give them some relief in this. It is a different matter that nothing like this happened. He did not make any changes in the tax slabs in the interim budget 2024. However, you do not need to be disappointed by this. Here we are telling you about 10 such methods with the help of which you can easily save a good amount of tax. This is for both government and private10 Easy Income Tax Saving Tipsemployees. Apart from this, their benefits are available in both old and new tax regime.
1. Section 80C: This is an important provision in the Income Tax Act, 1961. It allows individuals and Hindu undivided families (HUFs) to avail tax deductions on certain types of investments and expenses. This helps the taxpayer to reduce his taxable income. The maximum limit of deduction under section 80C is Rs 1,50,000.
What are the major deductions included under Section 80C?
- Life Insurance Premium: You can claim tax deduction for the premiums paid for your life insurance policy and the life insurance policies of your dependents.
- Pension Scheme Contribution: You can claim deduction on contributions made to National Pension Scheme (NPS), Atal Pension Yojana (APY), Public Provident Fund (PPF), and other pension schemes.
- ELSS Mutual Fund: You can claim deduction on investments made in Equity Linked Savings Scheme (ELSS).
- Tuition Fees: You can claim deduction on children’s school or college tuition fees.
- Home Loan Interest: You can claim deduction on the interest paid on your home loan.
- Stamp duty and registration fees: You can claim deduction on stamp duty and registration fees paid while purchasing a home.
2. Section 80 CCD(1B): This is an additional deduction under Section 80 CCD(1) of the Income Tax Act, 1961. This deduction is available to those individuals who contribute to the National Pension Scheme (NPS). Under this section, an individual can claim an additional deduction of up to Rs 50,000 on contributions made to the NPS Tier I account. This deduction is in addition to the deduction limit of Rs 1,50,000 available under section 80C.
This means that individuals investing in NPS can claim a total deduction of up to Rs 2,00,000 under Section 80C and 80 CCD(1B).
What is the eligibility for Section 80 CCD(1B)?
- You must have an NPS Tier I account.
- You have to contribute to NPS.
- Your age should be between 18 years to 70 years.
3. Section 80 CCD (2): This is an additional deduction under Section 80 CCD (1) of the Income Tax Act, 1961. This deduction is available to individuals whose employers contribute to the National Pension Scheme (NPS). Under this section, an individual can claim an additional deduction of up to Rs 10,000 on the contribution made by his employer to the NPS Tier I account. This deduction is in addition to the deduction limit of Rs 1,50,000 available under section 80C. This means those whose employers contribute to NPS can claim a total deduction of up to Rs 2,10,000 under section 80C, 80 CCD (1) and 80 CCD (2).
What is the eligibility for Section 80 CCD (2)?
- You must have an NPS Tier I account.
- Your employer must contribute to NPS.
- Your age should be between 18 years to 70 years.
4. Section 80D: This section in the income tax law allows individuals and Hindu undivided families (HUFs) to avail tax deduction on health insurance premiums and certain medical expenses. It helps the taxpayer to reduce his taxable income.
5. Professional tax deduction: Professional tax is imposed by some states. This is a tax that applies to salaried individuals, self-employed and professionals. This tax is an important source of income for state governments. The maximum deduction for professional tax for the financial year 2023-24 is Rs 2,500. This means you can deduct up to Rs 2,500 from your taxable income. Provided you have paid professional tax.
6. Leave Travel Allowance: LTA is a type of allowance that employers give to their employees to travel on leave. This allowance helps employees to enjoy their leave and spend time with their families. The amount of LTA is decided by the employer. It is usually one percent of the employee’s salary. LTA allowance is taxable, but employees can avail tax exemption in certain cases. To claim it, employees have to fulfill certain conditions. These include traveling during your leave, submitting travel documents and applying for LTA allowance.
7. House Rent Allowance: HRA is also a kind of allowance that employers give to their employees to take a house on rent. This allowance helps employees to rent houses in expensive cities. The amount of HRA is decided by the employer. It is usually one percent of the employee’s salary. HRA allowance is taxable. But, in some cases employees can avail tax exemption. To claim HRA, employees have to fulfill certain conditions. These are like this:
- They live in a rented house.
- They have submitted the rent receipt.
- Have applied for HRA allowance.
8. Deduction on home loan interest: There are two main sections to avail the benefit of deduction on home loan interest. The first of these is Section 24. This section allows you to avail deduction up to a maximum of Rs 2 lakh on interest on home loan taken against property. There are conditions to claim it. First, the property must be owned by you and you must live in it. Secondly, the home loan should be taken from a financial institution. Third, construction should be completed within 5 years of construction/purchase.
The second section is 80EEA which is for affordable housing. This section specifically allows availing deduction of up to Rs 1.5 lakh on interest on home loan under the Affordable Housing Scheme taken from April 1, 2016 to March 31, 2022.
The eligibility rules for this are as follows:
- The property should be purchased with a home loan of less than Rs 45 lakh taken from a financial institution.
- You must be a first-time home buyer.
- You cannot claim benefits under Section 80EE.
9. Section 80E: This is an important section of the Income Tax Act. This helps individuals and Hindu Undivided Families (HUFs) to avail tax deduction on interest on loans taken for higher education. It helps the taxpayer to reduce his taxable income. The maximum limit for deduction under section 80E is Rs 25,000 for the financial year 2023-24. This means you can deduct up to Rs 25,000 from your taxable income if you have taken a loan for higher education and paid interest on it.
10. Standard Deduction: This is a tax deduction that is available to salaried employees and pensioners to deduct from their taxable income. The standard amount for the financial year 2023-24 is Rs 50,000. This means you can deduct up to Rs 50,000 from your taxable income. Provided you opt for standard deduction.