How to save income tax

As a taxpayer, you should not view income tax as a financial burden. Instead, look at tax-saving options and explore opportunities to make the most of your tax savings by including various tax benefit investments in your financial portfolio. Know more about how to save income tax using this detailed guide on Tax Saving Options(s).

How to save income tax ?

In India, all income tax related matters are monitored under the Income Tax Act, 1961. As per this Act, it is necessary that your income or profit is subject to taxation (tax assessment) in every financial year, which is why you must be aware of how to save income tax.


Depending on your total income, you can choose various tax benefit investment options and plan your income tax savings accordingly. To know in depth about the various ways through which you can save tax, it is necessary for you to understand how various tax saving options are covered under this Act. In this article, we will go through all the major tax deductions under the Income Tax Act:

Section 80C (up to Rs.1.5 lakh)
Section 80CCD on NPS
Section 80D on Health Insurance Premium
Section 80E on Education Loan
Section 80EE Rs. up to 50,000
Section 80G on donations made
Section 80GG on HRA
Section 80TTA on Bank Interest

How to save tax by using Income Tax Deductions?

The first step to understand how to save income tax is to know about the various deductions allowed under the Income Tax Act for tax benefit investments. It can help you in reducing your taxable income according to the tax saving options you choose.


There are a number of tax benefit investments or eligible expenses incurred for deduction, on production of which proof of which makes you eligible for the deduction and can plan for income tax savings accordingly. Not only this, different sections of the Income Tax Act are devoted to different tax benefit investments that you must know to learn about tax saving.

Let us discuss the various deductions related to tax benefit investments and other contributions to get an idea of ​​how to save income tax:

1. Section 80C

Section 80C is an important part of the Income Tax Act, so you should know about the various tax saving options involved and understand how to maximize income tax savings.

You can claim deduction under section 80C of Income Tax 1961 on your tax benefit investments (tax benefit investments) and contributions to various financial products. Many tax professionals primarily consider 80C deductions when explaining income tax savings.

Under section 80C[1] you can pay Rs. 1.5 lakh deduction can be availed. Along with this, take a look at tax saving options like ELSS and PPF to know in depth about income tax savings. Life Insurance Premium Amount, ELSS Investment, Tax Saver Fixed Deposit (Tax Saving Fixed Deposit), PPF Investment, PF Contribution (Employee Contribution / Employee Contribution only), Home Loan Principal Repayment Amount (Home Loan Principal Refund Amount) and many other Income Tax Acts incorporated under 1961. Out of the above mentioned deductions, a total deduction of Rs.1.5 lakh can be claimed. It is important to consider the different tax saving aspects of different tax benefit investments as part of tax planning.

2. Section 80CCD

While learning about how to save income tax, you must have heard about National Pension System (NPS). NPS is a tax saving option that you can opt for to reduce your net taxable income. Section 80CCD covers the deductions whose benefits you can avail with the investments made in your NPS. To understand how to save income tax with NPS, you must first understand about Section 80CCD in detail.

The two sub-sections of 80CCD explain in detail how one can save income tax with NPS:

Section 80 CCD (1)
It incorporates tax benefit investment (tax benefit investment) in NPS which makes you eligible for deductions. As per your intention about how to save income tax, you can invest in NPS and get the facility of tax benefits.

The maximum deduction for salaried (salaried) persons and self-employed (self-employed) persons under this sub-section is 10% of their salary and 20% of the total gross income (gross income) respectively. You should know this while planning an income tax saving plan.

Section 80CCD (1B)
80C in Rs. 1.5 lakh from the limit of Rs. This includes tax benefit investment with an additional deduction of ₹50,000. If you earn a good salary then you must include the tax saving options covered under this section in your income tax saving plan.

3. Section 80D

Under this section for the premium paid against the tax saving option of Health Insurance (Health Insurance) [2], you can pay up to Rs. You can avail the facility of deduction up to Rs.1 lakh. When planning an income tax saving plan, keep in mind that it includes dual benefit of health cover and tax deduction.

The sub-divisions for the tax deduction limit are as follows:
  • Medical insurance premium for self, spouse and children up to Rs. 25,000 deduction
  • If you are a senior citizen then Rs. 50,000 deduction
  • Premium paid by your parents up to Rs. 25,000 deduction
  • If your parents are senior citizens then Rs. 50,000 deduction

It is important to know these sub-divisions for a deeper understanding of how to save income tax.

Also read: Tips To Consider Before Buying A Health Insurance Policy In India

4. Section 80E

As a part of this How to Save Income Tax scheme, the education loan taken by you can avail you the facility of tax deduction. Unlike other tax saving options, the interest (interest) paid by you towards education loan is eligible for deduction under section 80E.

To understand more about how income tax can be saved under this section, you must first check the total amount paid as loan interest (interest on loan) in a financial year. Unlike other types of tax benefit investments, there is no upper limit on deduction of claims made under this section. This is the most different factor that you must know about while considering how to save income tax.

5. Section 80EE

You should consider the home loan (home loan) you have taken while planning your taxes. Because Section 80EE on payment made by you towards home loan interest (interest on home loan) will attract Rs. Allows tax deduction of up to 50,000. This tax benefit is over and above the limit of section 80C which includes various tax saving options.

If you are buying a home for the first time, then include this section in your tax planning. Apart from this, the loan amount (loan amount) of Rs. Should not be more than 35 lakhs. Knowing about such important information is very crucial when you are thinking of saving income tax.

6.Section 80G

Donation is considered as a tax saving option for Indian taxpayers. Therefore, doing things for your own good should be included in your tax saving strategies. You can claim deduction under section 80G on donations made to non-profit organizations.

While doing tax saving planning under section 80G, you should be aware of the following facts:
  • To be eligible for the deduction, donations should be made only to societies registered under section 12A.
  • Rupee. Cash donations above 2000 are not considered valid for deduction.
7. Section 80GG

While planning how to save income tax as a salaried individual, you can claim deduction on the HRA component of your salary. However, if you live in a rented house and your salary does not include HRA, you can claim deduction under section 80GG. The rent paid by you in this way becomes a tax saving option for you to exercise.

The condition under this section is that you should not be the owner of a house. Also, you can claim tax savings under section 80GG once in a year, whichever is less:
  • Rupee. 5000 per month
  • 25% of your annual salary
  • Total rent paid – 10% of total income

8. Section 80 TTA


Your savings account (savings account) gives you interest after some time. It becomes part of your income and thus can act as a tax benefit investment. Section 80TTA allows deduction on interest income (interest income).

To understand better how to save income tax under Section 80TTA, you should know that you:
  • On interest income (interest income) received from a savings account (savings account) in a bank/post-office
  • Rupee. On interest received up to the limit of 10,000
If you are having trouble understanding how to save income tax, then avail the facility of deduction on interest earned along with other tax saving options.


Also read: Income Tax Slabs

Frequently asked questions about how to save income tax ?


1. Can I claim deduction without giving proof to my employer?

While planning for income tax savings, it would be advisable to advise you to give proof of contribution (contribution and investment) made in various tax saving options (tax saving options) to your employer. This is necessary to help your employer in ascertaining your taxable income as per your tax benefit investment.

However, you can claim deduction for tax benefit investment (tax benefit investment) at the time of filing the return if you are not able to provide proof to the employer in time. Consult a tax expert for more information on how to save income tax.

2. Can I avail the facility of deduction under 80C for life insurance premiums paid to a private company?

Life insurance is the most common tax saving option in India. Life insurance premium can help you in preparing your tax planning. You can avail the facility of tax deduction under section 80C by paying the premium to an IRDAI approved insurer. If you are planning to take a life insurance policy, use the online term calculator to check the estimated premium.

3. Can a firm/company avail 80C benefits while planning for Income Tax Savings?

When you consider various income tax saving options, only one person can reduce the tax liability under section 80C. Unlike other tax saving options, the provisions of this section are not made for companies.

Source:

[1]https://dor.gov.in/sites/default/files/IT%20Act%20%28English%29_0.pdf

[2]https://www.incometaxindiaefiling.gov.in/eFiling/Portal/DownloadUtil/ITR_Validation_Rules/ITR-4/ITR_4_Rules_AY_2019-20_V1.0.pdf

ARN:- July/Bg/H/04