How to Save Tax
Maximise your tax benefits. Learn how to reduce Income Tax
- Knowing how to save tax can reduce your tax outgo significantly
- Several sections of the Income Tax Act of 1961 help taxpayers save tax.
- Invest in several tax saving schemes and claim additional benefits.
- Get tax deductions on investments like health Insurance, ELSS Mutual Funds, PPF and more.
- Enjoy maximum tax-saving benefits on Home Loan principal and interest repayment.
Tax payment is an obligation you must comply with as an Indian citizen. You should file your returns per your tax slab. To ease your tax burden, the Government of India offers tax-saving benefits on different investments under various sections of the Income Tax Act, 1961. Let us understand how to reduce income tax on investments in India.
How to Save Income Tax Under Various Sections of the IT Act
Under section 80C of the IT Act, you can enjoy tax deductions of up to INR 150,000 per financial year. You can get this benefit by investing in tax-saving schemes like Equity Linked Saving Schemes (ELSS), Employee Provident Fund (EPF), Public Provident Fund (PPF), National Pension Scheme (NPS). 80C deductions also apply to repaying the principal component of your Home Loan or paying tuition fees for up to 2 children.
Besides 80C, NPS investments also qualify for an additional tax-deduction benefit of INR 50,000 under Section 80CCD. Therefore, you get a total tax deduction benefit up to INR 200,000 per financial year on NPS investments. Section 80CCD also applies to employer contributions to pension schemes. The contribution should not exceed 14% and 10% from Central Government and private companies, respectively.
Under Section 80D, you can claim deductions of INR 25,000 to INR 100,000 per annum on paying Health Insurance premiums for self, spouse, and dependent children and parents. The premiums you pay typically depend on your and your parents’ age, and the deductions you can get are as under:
- Individual + Spouse + Dependent Children = INR 25,000
- Individual + Spouse + Dependent Children + Parents (below 60 years) = INR 50,000
- Individual + Spouse + Dependent Children + Parents (60 years and above) = INR 75,000
- Individual (60 years and above) + Spouse + Dependent Children + Parents (60 years and above) = INR 1 Lakh
Another way how to save tax is to utilise deductions on the Interest repayment component of your Home Loan. You can claim a tax benefit of up to INR 200,000 per annum under Section 24(B). This benefit applies to taxpayers occupying the loaned property.
When you donate to government-backed charities, you can claim 100% of the donation as a tax deduction from your taxable income, therefore reducing your tax liabilities.
Section 80 TTA & 80TTB
As a Savings Account holder, you can claim interest of up to INR 10,000 under section 80TTA from all Savings Accounts as a tax deduction. Under section 80TTB, the maximum amount you can claim is INR 50,000 per financial year, including Savings Account, Fixed Deposits etc.
Remember, from financial year 2020-21, you can continue to file taxes per the old regime since the new tax regime does not allow deductions or exemptions.
Now that you know how to save tax ensure you utilise maximum tax-saving benefits. With proper investments, you can substantially reduce your tax liabilities and enjoy tax benefits as well.
Download digibank by DBS on your smartphone, register and choose any tax-saving options from the menu.
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.