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In India, income tax is levied on the income earned by the individual or business. The tax varies with the respective income as per the applicable tax slab in India (both old regime and new regime). Income taxpayers always look for the opportunities that can help save taxes and reduce their entire tax liability. There are numerous ways and deductions to save tax under the Income Tax Act, 1961. We have reproduced here some of the deductions available under the said Act.
- National Pension Scheme (NPS) [SECTION 80CCD (1B)] :
When looking on How to save taxes in India, National pension scheme is the best option. Tax saving option that is available to both government and private employees. An additional deduction of up to Rs. 50,000/-for contributions made by individual taxpayers towards the NPS. The additional deduction of Rs. 50,000/- under Section 80CCD(1B) is available to assess over and above the benefit of Rs. 1.50 Lakhs
- Health Insurance premium [Section 80D] :
Offers deduction for money spent on health insurance.
Assessee can claim a tax benefit up to Rs. 25,000 in respect of the below contributions:
– Premium paid to keep in force health insurance covering self, spouse, or dependent children.
– Any contribution to Central Health Government Schemes.
Apart from the above, an additional deduction for the insurance of the parents is available to the extent of Rs. 25,000 if they are less than 60 years of age or Rs. 50,000 if they are more than 60 years of age. If the individual and the parent are both above 60 years of age, the maximum deduction available under this section will be Rs.1,00,000.
In the case of people over 80 years of age, health insurance is usually not available. Thus, the deduction of upto Rs 50,000 is allowed even if money is spent on their treatment rather than on health insurance premium.
Preventive Healthcare Expenses: If your total insurance premium paid is less than the maximum allowed limits for any of the categories, then up to Rs 5,000 can be claimed for a preventive health check of your family in the financial year, within the said limits.
- Medical treatment & maintenance of Handicapped dependent relative[Section 80DD] :
This deduction is allowed to Resident Individuals or HUFs for a dependent-who is differently-abled and is wholly dependent on the individual (or HUF) for support & maintenance. Flat deduction of Rs. 75,000 for normal disability and of Rs. 1,25,000 for severe disability is allowed.
- Medical treatment of specified disease [Section 80DDB]:
If resident individual or an HUF has incurred medical expenses for treatment of specified disease or ailment, such expense is allowed as deduction of Rs. 40,000 in normal case and Rs 1,00,000 for senior citizen patient subject to maximum of actual expenditure on treatment.
- Handicapped Assessee [Section 80U]:
Deduction is allowed to resident individual of Rs 75,000 for normal disability and Rs 1,25,000 for severe disability.
- Interest on loan for higher education in India or aboard [Section 80E]:
Allowed to Individual if loan taken for the education of self, spouse, children and any student for whom assesse is a legal guardian.
Deduction can be taken of the interest amount for a period of 8 consecutive years starting from the year in which assesse starts paying interest.
- Interest on Electric Vehicle loan [Section 80EEB]:
An individual assesse can avail maximum deduction of Rs 1,50,000 for the interest on loan taken for electric vehicle, fulfilling the following conditions:
- Loan taken from banks or financial institutions including NBFC
- Loan sectioned between 01/04/2019 to 31/03/2023.
- Deduction can’t be taken for the same under any other provision of Income Tax Act for any AY.
- Donations [Section 80G]:
All assesses can claim deduction for the donation to various government fund, Institution for promoting family planning, to Indian Olympics Association or any other institution for development of sports in India (only for companies), Housing development authority, temples, charitable trust and for promoting minority community in India. The deduction is allowed with the conditions of ATI and 50%/100% of expenditure.
- Rent paid [Section 80GG]:
An individual (also salaried employees if not receiving HRA) can claim deduction for the rent paid subject to the lowest of the following:
- Rs 5,000 pm
- 25% of Adjusted GTI
- Rent paid – 10% of Adjusted GTI
- Donation to political parties or electoral trust [Section 80GGB and 80GGC]:
100% of the donation made through any mode of payment other than cash to political parties or electoral trust can be claimed as deduction.
- Deduction in respect of employment of new employees[Section 80JJAA]:
Deductions for the recruitment of new or additional employees, 30% of additional employee cost is allowed for 3 consecutive years. Subject to following conditions:
- Assessee must be subject to tax audit u/s 44AB;
- available only in case of Business
- Business must not be acquired by way of transfer from any other person or as a result of any business reorganization
- The Assessee must furnish CA’s report in form 10DA before the Tax Audit due date.
- On interest income:
- SECTION 80TTA: To individual and HUF for the saving bank interest subject to maximum Rs 10,000
- SECTION TTB: To resident senior citizen for the saving bank interest or deposit subject to maximum Rs 50,000
- SECTION 10(15)(i): Post Office savings bank interest is exempt up to Rs. 3,500 (in an individual account) and Rs. 7,000 (in a joint account).
- Investment in Business Trust:
Any distributed income, received by a unit holder from the business trust, other than interest, dividend and rental income (i.e. rental income earned directly by a REIT) would be exempt from the total income of the unit holder.
- Tax Benefits on Home Loan:
The following tax benefits can be claimed for the home loan taken for the purchase, construction, repair or renovation of house property:
- Section 24: Deduction is allowed on due basis upto Rs 2,00,000 pa for the interest on home loan.
- Section 80C: For the repayment of principal amount of loan taken from banks or financial institution for purchase or construction and also for the stamp duty, registration fee for acquisition of house property upto Rs 1,50,000 pm
- Section 80EE/80EEA: Additional deduction for the interest on loan in excess of Rs 2,00,000 (under section 24) is allowed for the loan taken for the purchase of house property to individual assessee subject to the conditions.