6 Ways to Save Your Income Tax in 2024
Deep dive into practical and legal ways to save income tax in India, helping you retain more of your hard-earned money. Read to know more about the current slabs and rates.
Tax planning can be daunting, overwhelming, and time intensive but with the right strategies, you can plan your tax liabilities in a way that will help you save income taxes and increase your income whether you are a salaried employee, a business owner, an investor, or a professional. How good is that?
You must conduct your research even planning income tax savings is time-consuming and it will be valuable since taxation impacts everyone directly. The other option is that you consult a tax consultant to help you with relevant Income tax saving tips to maximise your benefits.
We invest in various products that advance our quality of life but can also cause considerable financial distress. The government offers income tax exemptions on direct taxes charged on your whole pay to lighten this burden. In this blog we will try to delve into practical and legal ways to save income tax in India, helping you retain more of your hard-earned money.
An Overview of the current tax slabs and rates
Tax liability is calculated based on your income by the Income Tax Department.
For individuals below 60 years of age:
- Annual income between ₹2.5 lakh and ₹5 lakh is taxed at 5%.
- Annual income between ₹5 lakh and ₹10 lakh is taxed at 20%.
- Annual income above ₹10 lakh is taxed at 30%.
(An additional 4% health and education cess is applicable.)
Some other details of slabs are:
- A full tax rebate is provided for individuals earning up to ₹5 lakh.
- Since the financial year 2020, a new tax slab has been introduced for individuals who choose to forgo certain deductions and tax exemptions.
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Apply NowIncome Tax Deductions under Section 80C
Section 80C is a well-known tax-saving way, the Indian Income Tax Act offers an inclusive range of deductions and exceptions to lessen your tax liability. Here are some income tax saving options discussed to help you save under Section 80C.
A. Saving income Tax with National Pension Scheme under Section 80CCD(1B) + 80CCD(1)
A summary of saving income tax with the National Pension Scheme (NPS) under Sections 80CCD(1B) and 80CCD (1) are explained here:
Section 80C Deduction:
- Invest up to ₹1.5 lakh in the National Pension Scheme (NPS).
- A deduction of ₹1.5 lakh can be claimed from taxable income.
- Applicable to all tax brackets.
Section 80CCD(1B) Deduction:
- Additional deduction of up to ₹50,000 for NPS contributions.
- This deduction is above the ₹1.5 lakh limit under Section 80C.
- Advantageous for individuals in higher tax brackets.
Overall Benefit:
- Leveraging deductions through NPS can significantly reduce taxable income.
- Improves financial security by contributing to retirement savings.
B. Getting Income Tax benefits on health insurance premiums under Section 80D
This table briefs the tax benefits of each section under Sections 80D and 80DD:
|
Section |
Benefit |
Deduction Limit |
Details |
|
80D |
Health Insurance Premiums |
Up to ₹25,000 if below 60 years |
For premiums paid for oneself, spouse, dependent children, and parents |
|
Up to ₹50,000 for senior citizens (60+ years) and parents (regardless of age) |
|||
|
Preventive Health Check-ups |
Additional ₹5,000 |
||
|
Verification |
- |
Check health insurance policy papers for eligible premiums. |
|
|
80DD |
Medical Expenses for Dependent with Disability |
₹75,000 or ₹1,25,000 (based on disability level) |
Deduction for medical expenses incurred on a dependent with a disability |
|
Combination with 80D |
- |
Can be joined with deductions under Section 80D for a total benefit of ₹75,000 or ₹1,25,000. |
C. Income Tax benefits on the interest component of a home loan under Section 24
For a better understanding of the information on home loans under section 24 under each section, you can refer to this table below:
|
Section |
Benefit |
Deduction Limit |
Details |
|
Section 24 |
Interest on Home Loan for Self-Occupied Property |
Up to ₹2 lakhs per fiscal year |
Deduction for the total interest paid on all self-occupied properties. |
|
Interest on Home Loan for Rented Property |
No maximum limit |
A deduction is available for the total interest amount on rented properties. |
|
|
Section 80EE |
Additional Deduction for First-Time Homebuyers |
Up to ₹1.5 lakhs |
Available for first-time homebuyers meeting specific criteria (e.g., property value and loan amount). |
|
General Note |
Interest vs. Principal Repayment |
- |
Deductions are applicable for the interest component of EMI payments, not the principal amount. |
D. Income Tax benefits on the interest component of an education loan under Section 80E
Given below are the benefits of the interests of an education loan under Section 80E
- Deduction Available:
- Interest paid on education loans taken for higher education
- Principal amount is not eligible for deduction
- Eligible Borrowers:
- The loan can be for yourself, your spouse, your children, or a student for whom you are a legal guardian.
- Definition of Higher Education:
- Courses of study undertaken after passing the Senior Secondary Examination (Class 12) or its equivalent.
- Deduction Duration:
- Available for a maximum of 8 years or until the interest is fully paid
- Deduction period begins from the year you start repaying the loan
- Deduction Limit:
- No upper limit on the amount of interest that can be claimed as a deduction under Section 80.
E. IncomeTax savings options on Savings Account Interest under Section 80TTA and 80TTB
This table shows a simple comparison and highlights the differences in benefits based on the section and eligibility of income tax of savings account options under Section 80TTA and 80TTB.
|
Section |
Eligibility |
Deduction Limit |
Applicable Accounts |
Notes |
|
80TTA |
Individuals below 60 years of age and Hindu Undivided Families (HUF) |
Up to ₹10,000 per fiscal year |
Savings accounts in banks, post offices, or cooperative societies |
Does not apply to fixed deposits, recurring deposits, or term deposits. |
|
80TTB |
Senior citizens (60 years and above) |
Up to ₹50,000 per financial year |
Savings accounts, fixed deposits, recurring deposits, and term deposits in banks, post offices, or cooperative banks |
Provides greater tax relief compared to Section 80TTA. |
F. The benefits of donations made to charitable institutions under Section 80G
The information on charitable donations and tax exemptions under Section 80G are given below:
- Deduction Eligibility:
- Donations to charitable institutions or funds recognized by the Income Tax Department
- For a list of approved institutions, check the Income Tax Department’s website
- Cash Donations Limit:
- Donations above ₹20,000 in cash are not eligible for deduction
- Deduction Ratios:
- 50% of the donation amount: Applicable with or without a definite limit, depending on the institution and purpose.
- 100% of the donation amount: Available up to 10% of the accustomed gross total income.
- Receipt Requirements:
- A stamped receipt from the donation institution must be taken
- The Receipt should consist of the institution's name, address, PAN, and the donation amount
- Donations in Kind:
- Donations like clothes, food, etc., are not entitled to deduction under Section 80G.
- Overall Benefit:
- To reduce your tax liability while supporting charitable causes, claim deductions under Section 80G
Conclusion
By exploring and applying various tax-saving options such as deductions on investments, exemptions, and strategic financial planning, you can significantly reduce your income tax liability and enhance your overall financial health. Making informed decisions on where to invest, such as in health insurance, home loans, or retirement funds like NPS, allows you to maximise your savings and secure a financially stable future.
FAQs
Q1. Why do we need to save tax?
Ans. One of the benefits of tax saving is that you can avail of deductions for various essential long-term purchases. For instance, there are tax saving deductions in the Income Tax Act for interest accumulated on your home loan, education loan, and savings account.
Q2. Why do we need to file income tax?
Ans. Filing an Income Tax Return (ITR) is fundamental to a nation’s progress and offers several benefits. It assists you in claiming TDS refunds, makes loan applications easier, and allows you to carry forward losses. You can also claim deductions and exemptions under the Income Tax Act, of 1961.
Q3. What is meant by the concept of tax saving?
Ans. A tax saving is a reduction in the amount of taxes paid by an individual, business, or other taxpayers. They can help in reducing income tax coverup or total tax liability after filing an income tax return. Tax savings often result from deductions, exemptions, and credits.
Q4. What is the basic concept of tax planning?
Ans. Tax planning is the process of arranging financial affairs in a way that makes the most of tax benefits and minimizes tax liabilities. It involves analyzing an individual's or an organization's income, expenses, investments, and other financial activities to identify probable tax-saving opportunities.
Sapna aapka. Business Loan Humara.
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