10 Ways To Save Taxes In FY 23-24
“In this world, nothing can be said to be certain, except death and taxes”- Benjamin Franklin
While there is nothing that you can do for the first one, you can surely do tax planning and save your hard-earned money.
Tax planning involves using available tax deductions and investing in instruments that offer exemptions under the Income Tax Act 1961. Read this article to learn how to save tax in 2024.
Basics Of Income Tax Slab Rate
Before we move ahead and cover how to save tax, let us first understand how much tax you are liable to pay as per your income tax slab.
Until the Financial Year 2021, there was a single tax regime. However, Nirmala Sitharaman, the Finance Minister, introduced a new tax regime that became a default tax option. If you wish to choose the old regime, you must select it or inform your employer while manually planning taxes.
What is the difference between both tax regimes? Under the new regime, income up to INR 7,00,000 is exempt from tax, while under the old regime, it is INR 5,00,000.
However, in the new tax regime, you cannot claim many deductions under the Income Tax Act, 1961, which you can claim in the old regime. This includes interest on housing loans, standard salary deductions, child education allowance, helper allowance, and leave travel allowance.
Here are tax slab rates under the old and new income tax regimes.
The New Income Tax Regime
Income | Tax Rate |
Upto INR 3,00,000 | 0 |
INR 3,00,000 to INR 6,00,000 | 5% |
INR 6,00,000 to INR 9,00,000 | 10% |
INR 9,00,000 to INR 12,00,000 | 15% |
INR 12,00,000 to INR 15,00,000 | 20% |
INR 15,00,000+ | 30% |
Note: You do not pay taxes if your income is under INR 7,00,000. But if it is beyond that, the above tax slabs apply.
The Old Income Tax Regime
This can be divided into three categories: i) individuals under the age of 60, ii) individuals between the ages of 60 and 80, and iii) individuals above the age of 80.
Individuals Under the Age of 60
Income | Tax Rate |
Upto INR 2,50,000 | 0 |
INR 2,50,000 to INR 5,00,000 | 5% |
INR 5,00,000 to INR 10,00,000 | 20% |
INR 10,00,000+ | 30% |
The tax exemption limit for individuals between the ages of 60 and 80 is INR 3,00,000, and for individuals above 80, it is INR 5,00,000.
The rest of the income tax slabs are similar. With the old tax regime, you could do tax planning and invest your money to save on taxes.
Now that you know the basics of income tax and which tax slab you fall into, here is how to save tax.
10 Tips To Save On Income Tax
Saving tax requires tax planning. To make informed decisions, you need to consider a wide range of factors, such as your income, existing investments, choice of income tax regime, employment type, etc. Here are some common tips to help you.
1. Save Tax Under Section 80C
With Section 80C of the Income Tax Act, you can invest in tax-saving instruments and get tax benefits of up to INR 1,50,000 in a financial year. These tax-saving instruments include:
Investment Instruments | Feature |
Equity Linked Savings Schemes | Invest in market-linked instruments. It comes with a 3-year lock-in |
National Pension System | Invests in equity + debt and regulated by the Pension Regulatory Fund Authority of India |
Senior Citizen Savings Scheme
| A 5-year maturity period, low risk, and return of 8.2% |
Public Provident Fund
| A 15-year lock-in and return rate of 7.1% |
National Savings Certificates
| A 5-year lock-in and return rate of 7.7% |
Tax-saving FDs
| A 5-year lock-in and return depends on the bank chosen |
Term Insurance | Tax benefits and protects your family in case of an unfortunate event |
Investing in all these instruments can get a maximum tax deduction of up to INR 1,50,000. In the case of investing in NPS, you get an additional deduction of INR 50,000 under section 80CCD (1), which is above the initial INR 1,50,000.
2. Save Tax Under Section 80D
Under Section 80D of the Income Tax Act, 1961, you do tax planning to save on the medical insurance premium paid for yourself and your family members. You can count your parents, spouse, and children as your family members, and the maximum deduction you claim under this section is INR 1,00,000.
Deduction As Per Age | Deduction Amount |
For yourself and your family under 60 years of age | INR 25,000 |
For yourself and your family above 60 years of age | INR 50,000 |
For parents under 60 years of age | INR 25,000 |
For parents above 60 years of age | INR 50,000 |
You can claim INR 5,000 for a preventive healthcare check, too.
Based on the premium amount and age of the insured individual, you can save taxes. Health insurance also provides security against rising medical inflation and hospitalisation costs.
3. House Rent Payment
This is helpful if you are a salaried individual. You may have noticed House Rent Allowance or HRA Allowance in your salary structure. If you are renting a home and do not have any other home under your name (and it is self-occupied), you can claim a deduction under Section 80GG.
The maximum amount you claim under this section is INR 60,000 yearly or 25% of your total income, whichever is lower.
4. Home Loan Interest Payment
Under Section 80EE, you can claim home loan interest deductions on a home purchased on a loan during a financial year. The maximum tax benefit here is INR 50,000. The house cost should be under INR 50,00,000, and the loan amount has to be under INR 35,00,000.
You can claim an additional INR 1,50,000 for interest paid on a home loan under section 80 EEA. If you are a first-time home buyer, this is a great way to undertake tax planning and save money on taxes.
5. Educational Loan Interest Payment
If you have taken a student loan for yourself or your children, you can claim a deduction of the interest paid for up to 8 financial years with Section 80E.
There are no minimums or maximums here. However, you must submit proof of the interest amount when filing your taxes.
6. Child Education Allowances
If your employer provides a child education allowance, you can claim such deductions under the Income Tax Act, 1961.
You can delta a maximum amount of INR 100 monthly, or INR 1,200 annually, for your income tax slab. You can claim this deduction for two children.
7. Leave Travel Allowances
You can claim LTA under Section 10(5) twice in four financial years. This can be during domestic travel during your leave for yourself or your family members, including your dependent parents, spouse, children, and siblings.
8. Save Tax Under Section 44ADA
If you are self-employed, you can claim 50% of your total income as business-related expenses. This is called presumptive taxation. This tax deduction is helpful for freelancers and professionals like doctors, lawyers, etc.
The limit is set at INR 75,00,000, but 95% of your income receipts should be online. Otherwise, the maximum limit is INR 50,00,000.
9. Save Tax Under Section 80TTA
Under Section 80TTA of the Income Tax Act, you can get tax benefits of up to INR 10,000 for any interest income you earn in your savings account in a bank or post office.
10. Donations
Under Section 80G, if you have donated to an eligible charitable trust, you can claim a deduction against it in a financial year.
The donation should be made online or via cheque; otherwise, cash donations are subject to an INR 10,000 deduction limit.
Conclusion
Tax planning is an essential aspect of overall financial planning. It allows you to invest your money and reduce your taxable income.
To learn more about investment and financial planning, stay tuned to Grip Invest.
Frequently Asked Questions On Ways To Save Taxes In FY 23-24
1. How can I save taxes under Section 80c of the Income Tax Act 1961?
Section 80C of the Income Tax Act 1961 allows you to invest in instruments such as the National Pension System, senior citizen scheme, tax-saving fixed deposits, ELSS, and more. Investing in this instrument can claim a deduction of up to INR 1,50,000. In the case of NPS, you can claim an additional INR 50,000 under Section 80CCD (1).
2. How can I claim insurance premiums paid to avail of a tax deduction?
If you have paid health insurance premiums for yourself or your dependent spouse, parents, and children, you can claim a maximum deduction of up to INR 1,00,000 in a financial year. These deductions are available under Section 80D of the Income Tax Act 1961.
3. How can I benefit from tax planning while purchasing a home?
If you are purchasing a new home as a first-time buyer, you can claim the home loan interest deductions on the home under sections 80EE and 80EEA. Under the Income Tax Act 1961 sections, you can save INR 50,000 and INR 1,50,000, respectively.
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