If you are salaried and want to save income tax, then here are seven ways in which you can save your taxes for the financial year.
New Delhi: Most of the salaried individuals are confused about the taxes they have to pay for the financial year. They make investments in haste without understanding the various available options. Before saving on the taxes it is important to learn and understand the tax slabs and all the components of your salary. It will help you to understand the areas, where you can save taxes.
Apart from the section 80C of the income tax, there are many other allowances which can help to reduce the tax liability for the salaried class. There are a host of options to save tax under Income Tax Act, 1961. These insurance premiums, NPS, medical insurance, tax saving mutual funds, etc.
1. Section 80C, 80CC and 80CCD- Section 80C deduction is available for taxpayers who have made contributions for life insurance premiums, bank fixed deposits, payment of tuition fee, Sukanya Samriddhi Yojna (SSY), National Savings Certificate (NSC), ELSS, pension funds and more. Taxpayers can claim a maximum deduction of up to Rs 1.5 lakh under Section 80C, 80CC and 80CCD.
2. Public provident fund (PPF)- PPF account has a maturity period of 15 years. It offers exempt-exempt-exempt (EEE) income tax benefits. Hence, interest on this account is tax-free. The government has kept the interest rates unchanged at 8 per cent for April to June quarter. The interest rates on this account are revised every quarter.
3. National Pension System– There are two types of the NPS account. NPS Tier-I account is the primary account with a lock-in period while NPS Tier-II account is an optional account no lock-in periods. The subscribers can avail a deduction of Rs 2 lakh in total under Section 80 CCD (1) section 80 CCD (1B) of the Income Tax Act. It helps to build a retirement corpus.
4. Health Insurance premium– One can save taxes under Section 80D of income tax. If the medical insurance is purchased for the taxpayer, spouse or children, the maximum deduction that can be claimed is Rs 25,000. However, if the taxpayer’s parents are covered and above 60 of age, then a tax deduction of up to Rs 30,000 can be claimed.
5. House rent– Taxpayers can claim deduction on rent paid on residence used for his own purpose. The maximum deduction allowed under Section 80GG is Rs 60,000. It may be noted that the taxpayer can claim deduction under this section only if he or she has not received HRA from the employer.
6. Donation– Under section 80G, all the donations over Rs 2,000 made by cash, demand draft, bank transfer, credit card or debit card are eligible for deduction. However, any donation of over Rs 2,000 made in cash is not eligible for deduction.
7. Savings Account– Under Section 80TTA, interest income received from a savings account deposit qualifies for a deduction. However, it may be noted that the interest earned on a bank fixed deposit (FD) or time deposit will not be eligible for deduction under this section.