Are you a Salaried Person? Here are 7 Ways to Save Income Tax
There are many salaried people who do not know about the taxes they have to pay for a financial year. They make investments in a hurry without even understanding the different options available. Hence before you save on the taxes it is essential to learn & understand the tax slabs and all the components of your income. This will help you to understand the areas, where you can save taxes.
Besides section 80C of the income tax, there are numerous other allowances that can help cut the tax liability for the salaried individuals. There are many options to save tax under Income Tax Act, 1961. So let’s know about them:
How to Save Income Tax
Section 80C, 80CC & 80CCD
Section 80C deduction is for taxpayers who have made some contributions for life insurance premiums, bank fixed deposits, Sukanya Samriddhi Yojna (SSY), National Savings Certificate (NSC), payment of tuition fee, ELSS, pension funds etc. Taxpayers can claim a maximum deduction of up to Rs 1.5 lakh under Section 80C, 80CC & 80CCD.
National Pension System
There are basically 2 types of NPS account. First is NPS Tier-I account, which is a primary account with a lock-in period. The second is NPS Tier-II account, which is an optional account with no lock-in periods. The members can avail a deduction of Rs 2 lakh under Section 80 CCD (1) and section 80 CCD (1B) of the Income Tax Act. This helps to build a retirement amount.
Public provident fund (PPF)
Public provident fund account has a maturity period of fifteen years. PPF provides exempt-exempt-exempt (EEE) income tax benefits. Thus, interest on this account is tax-free. The centre 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.
Taxpayers can also claim deduction on rent paid on house used for his or her own purpose. The maximum deduction permissible under Section 80 GG is Rs 60,000. It is important to mention that taxpayers can claim deduction under this section only if they have not received the HRA from the employer.
Health Insurance premium
A person can save tax under Section 80D of income tax. If the medical insurance is purchased for the taxpayer, wife/husband or children then the maximum deduction that can be claimed is Rs 25,000. But, if the taxpayer’s parents’ are covered under it and they are above 60 years of age then a tax deduction of up to Rs 30,000 can be claimed.
Under Section 80TTA, interest income earned from a savings account deposit qualifies for a deduction. But, it must be noted that the interest received on a bank fixed deposit (FD) or time deposit is not eligible for deduction under this section.
Under section 80G, all the donations over Rs 2,000 which is made by cash, bank transfer, demand draft, debit card or credit card are eligible for deduction. However, if donations exceeding Rs 2,000 is made in cash then no deduction is allowed.