What is Tax Regime?
Tax savings refers to strategies, investments, and deductions that individuals or businesses use to reduce their taxable income and lower the amount of tax they owe. By leveraging tax-saving instruments and legal provisions, taxpayers can minimize their tax liability while aligning with financial goals.
Common Ways to Save Tax
Investments Under Section 80C:
Eligible investments include Public Provident Fund (PPF), Employee Provident Fund (EPF), National Savings Certificates (NSC), Tax-saving Fixed Deposits, and Equity Linked Saving Schemes (ELSS).
Maximum deduction: ₹1.5 lakh annually.
Health Insurance Premiums (Section 80D):
Premiums paid for self, family, and parents are eligible for tax benefits.
Maximum deduction:
₹25,000 (self and family).
₹50,000 (for senior citizen parents).
Home Loan Benefits (Section 24 and 80EEA):
Claim deductions on the interest paid for home loans.
Up to ₹2 lakh under Section 24(b) and additional benefits for first-time buyers under Section 80EEA.
Education Loan Interest (Section 80E):
Deduction on interest paid for education loans for higher studies.
No upper limit, but applicable only for 8 consecutive years.
Savings Account Interest (Section 80TTA and 80TTB):
Savings account interest up to ₹10,000 is tax-deductible under Section 80TTA.
Senior citizens can claim up to ₹50,000 under Section 80TTB.
NPS Contributions (Section 80CCD):
Contributions to the National Pension Scheme qualify for tax deductions under Section 80CCD(1B), with an additional limit of ₹50,000.
Donations (Section 80G):
Donations to approved charities and relief funds can be claimed as deductions.
Deduction percentage depends on the type of donation.
HRA (House Rent Allowance):
Salaried individuals living in rented accommodation can claim HRA exemption.
Tax-saving Tips:
Plan Early: Start planning at the beginning of the financial year to make better decisions.
Diversify Investments: Use a mix of short-term and long-term instruments for tax savings.
Keep Proofs Ready: Maintain receipts and proofs for eligible deductions to simplify the filing process.
Use both tax regimes wisely: Evaluate both old and new tax regimes annually to maximize savings.
By understanding tax-saving options and using them effectively, individuals can reduce their tax burden while achieving financial stability and growth.