Tax savings are an important part of financial planning, allowing individuals and businesses to minimize their tax liability through legal and strategic means. With a clear understanding of available deductions , exemptions, and investment options, one can efficiently reduce their tax liability.
High ReturnsGet Returns as high as 17%*
Zero Capital Gains taxunlike 10% in Mutual Funds
Save upto Rs 46,800in Tax under section 80 C
Income tax is a tax imposed by a government on the income earned by individuals and businesses within its jurisdiction.
Individuals are typically required to file an income tax return annually, reporting their income from various sources, such as wages, self-employment income, investment income, and other types of income. The tax liability is then calculated based on the individual's total income and applicable tax rates, taking into account any deductions, credits, or exemptions that may be available.
There are various sections under which you can save income tax in India. The most popular sections are:
Section 80C: This section allows you to deduct up to ₹1.5 lakh from your taxable income for investments made in certain financial instruments, such as Public Provident Fund (PPF), Employee Provident Fund (EPF), Unit Linked Insurance Plans (ULIPs), National Pension System (NPS), Equity Linked Saving Schemes (ELSS), and five-year tax-saving bank fixed deposits.
Section 80D: This section allows you to deduct up to ₹25,000 from your taxable income for the premiums paid towards health insurance for yourself, your spouse, and your dependent children. If you are paying for your parents' health insurance, you can claim an additional deduction of ₹25,000, up to a maximum of ₹50,000 per year.
Section 80E: This section allows you to deduct the interest paid on an education loan for yourself, your spouse, or your children. The deduction is not limited to any specific amount.
Section 80G: This section allows you to deduct donations made to certain charitable organizations from your taxable income. The deduction is limited to 50% of the donated amount, up to a maximum of 10% of your total income.
Section 80TTA: This section allows you to deduct the interest earned on your savings account deposit up to ₹10,000 from your taxable income.
Section 80EE: This section allows first-time home buyers to deduct the interest paid on a home loan up to ₹50,000 from their taxable income. The loan must have been taken between April 1, 2019, and March 31, 2022, and the value of the house should not exceed ₹50 lakh.
Section 80EEA: This section allows first-time home buyers to deduct an additional ₹1.5 lakh from their taxable income for the interest paid on a home loan. The loan must have been taken between April 1, 2019, and March 31, 2022, and the value of the house should not exceed ₹45 lakh.
Section 80C of the Income Tax Act, 1961, provides for deductions from taxable income for certain specified investments and expenses. The maximum limit for deductions under Section 80C is INR 1.5 lakh per financial year. Here are some of the best ways to save tax under Section 80C:
Unit Linked Insurance Plan (ULIPs): ULIPs are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. The premiums paid towards a ULIP are eligible for a deduction from taxable income up to a maximum limit of INR 1.5 lakh per financial year.
Equity-Linked Savings Scheme (ELSS): ELSS is a type of mutual fund that invests in equity and equity-related instruments. It has a lock-in period of three years, which is the shortest among all 80C options.
Public Provident Fund (PPF): PPF is a long-term savings scheme offered by the government. It has a lock-in period of 15 years, and the interest earned is tax-free.
National Savings Certificate (NSC): NSC is a fixed-income investment scheme offered by the post office. It has a lock-in period of five years.
Life Insurance Premium: Premiums paid for life insurance policies are eligible for deduction under Section 80C.
Employee Provident Fund (EPF): Contributions made to the EPF by an employee are eligible for deduction under Section 80C.
Sukanya Samriddhi Yojana (SSY): SSY is a government-backed savings scheme designed to encourage savings for the education and marriage of a girl child.
Senior Citizens Savings Scheme (SCSS): SCSS is a savings scheme for senior citizens, offering regular income with tax benefits.
Fixed Deposit (FD): Tax-saving fixed deposits with a lock-in period of five years are also eligible for deduction under Section 80C.
Home Loan Principal Repayment: The principal amount repaid on a home loan is eligible for deduction under Section 80C.
Tuition Fees: Tuition fees paid for the education of two children are eligible for deduction under Section 80C.
When it comes to saving on income taxes in India, there are numerous legal avenues available to individuals and businesses. Some other ways to save taxes are:
Charity Donations: Donations to specific relief funds and charity organizations are eligible for tax deductions under Section 80G.
Health Insurance Premium: Deduct up to Rs 25,000 for health insurance premiums for yourself, your spouse, and dependent children. Additional deductions are available for parents' premiums.
Savings Account Interest: Interest earned on savings accounts is tax-exempt up to Rs. 10,000. For senior citizens, this limit is increased to Rs. 50,000 under Section 80TTB.
Agricultural Income: Income from agriculture is exempt from income tax.
Specific Disease Treatment Expenses: Medical expenses for specific diseases are eligible for tax deductions under Section 80DDB.
Inheritance: Money received through inheritance is tax-free as India does not have an inheritance tax.
Section 80C Investments: Invest up to Rs. 1,50,000 in tax-saving instruments under Section 80C to reduce your tax liability.
Disabled Dependent Expenses: Deduct up to Rs. 75,000 for expenses related to a disabled dependent under Section 80DD.
Business Expenses: Business owners can claim travel expenses as part of business costs to reduce their tax liability.
Hindu Undivided Family (HUF): HUFs are eligible for separate tax exemptions and a basic tax exemption of Rs. 2.50 lakh.
Political Party Donations: Donations to political parties are eligible for a 100% tax deduction under Section 80GGC and 80GGB.
Education Loan: Interest paid on student loans is tax-deductible under Section 80E, with no upper limit.
Wedding Gifts: Wedding gifts from direct relatives are tax-exempt. Gifts from friends or unrelated individuals are tax-exempt up to Rs. 50,000.
NRE Account Interest: Interest earned on Non-Resident External (NRE) accounts is tax-free.
Educational Scholarships: Scholarships awarded to students are exempt from income tax under Section 10(16).
|Unit Linked Insurance Plan (ULIP)
|Varies with Plan Chosen
|15% to 18%
|5-Year Bank Fixed Deposit
|6% to 7%
|Sukanya Samriddhi Yojana (SSY)
|Senior Citizen Saving Scheme (SCSS)
|Public Provident Fund (PPF)
|7% to 8%
|National Savings Certificate
|7% to 8%
|National Pension System (NPS)
|12% to 14%
There are numerous ways to legally save on income tax in India for the financial year 2023-24. By taking advantage of the various exemptions, deductions, and benefits provided under the Income Tax Act, individuals and businesses can significantly reduce their tax liability.
For example: if you do not have any health insurance premiums to pay, you will not be able to claim a deduction under section 80D. You can use an income tax calculator to estimate how much tax you can save by claiming various tax deductions.
However, as a general rule of thumb, you can save up to 30% of your income tax liability by claiming all of the eligible tax deductions.
For example: if your income tax liability is ₹1 lakh, you can save up to ₹30,000 by claiming all of the eligible tax deductions.
Investments made under Section 80 C for an amount of up to Rs 1.5 lakhs against PPF, home loan, etc.
Investments made under Section 80D for medical insurance. Can claim a deduction of up to Rs 25,000
Investments made under Section 80EE against home loan interest and claim a deduction of up to Rs 50,000.
PPF (Public Provident Fund)
Health Insurance Plans
ELSS (Equity Linked Savings Scheme)
Bank FD (Fixed Deposit)
National Pension Scheme (NPS)
Senior Citizen Savings Scheme
EPF (Employee Provident Fund)
Below-enlisted are the 7 best tax saving options other than Sec 80C.
National Pension Scheme (NPS)
Interest on education loan (Section 80E)
Rajiv Gandhi Equity Savings Scheme (Section 80CG)
House rent allowance (Section 80GG)
Health Insurance (Section 80D)
Medical treatment under Sec 80DDB
Donations (Section 80G)
Deduction on rent
Deduction on higher education loan
Deduction on donations
Deduction for physical disability
Deduction on kids’ tuition fees
Deduction on expenses incurred on specified diseases’ treatment such as AIDS, Cancer, etc.
Deduction on bank savings account’s interest
Deduction on personal loan interest (taken for the purpose of house purchase)
Deduction on interest paid on the loan for revamp/reconstruction of home
Deduction on Long-term Capital Gains (LTCG) investments under Section 54 and 54F
Besides some tax-free expenses, these instruments majorly consist of tax-saving investments which range from pure equity to pure debt instruments.
However, every section amongst these has a pre-set maximum investment amount. This maximum investment amount is decided by the government. Based on the income tax slab an individual falls into, they do their maximum tax saving.
For instance, an individual paying 20% of her/his income as tax will save around Rs 20,000 on an investment of Rs 1 lakh; whereas an individual in the 30% bracket will save Rs 30,000 on the same investment.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
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