The Income Tax Act has made several provisions which allow you to reduce your taxable income. Many of these provisions allow you to not only save tax, but also serve as good investment options. The budget 2019 further brought tax cheer to people, especially the middle class. Now individuals with income up to Rs.5, 00,000 will get full tax rebate. Standard deduction has also been raised to Rs.50, 000 from 40,000. Given below are some useful tips on how can save taxes.
1) Life insurance premium
Premium paid for life insurance of the taxpayer, their spouse or children are eligible for deduction under section 80C of the IT Act. A deduction up to Rs.1.5 lakh can be claimed under this. Premium paid towards life insurance of parents is not eligible for deduction. Life insurance is a low risk investment for the protection of your family and is therefore a popular choice for saving tax. It must be noted that various investments allowed under section 80C should not exceed Rs.1.5 lakh.
2) Health insurance premium
Section 80D of the Income Tax Act provides deduction for premium paid towards health insurance. You can claim deduction of up to Rs.25,000 for the premium paid for self, spouse and children. You can claim additional deduction of Rs.5,000 towards annual health checkups. Health insurance premium paid for parents is also eligible for deduction up to Rs.25,000 and Rs.30,000 in case they are above 60 years of age.
3) Retirement schemes
Retirement plans such as Senior Citizen Savings Scheme, National Pension Scheme, Public Provident Fund and Employee Provident fund are eligible for deduction under section 80C. These schemes are also good investment option and are low risk avenues.
4) House rent
Taxpayers can claim deduction for house rent paid. The deduction available is the least of the following amounts:
a. Actual HRA received
b. 50% of [basic salary + DA] for those living in metro cities (40% for non-metros) or
c. Actual rent paid less 10% of basic salary + DA
5) Home loan
Section 80C allows deduction of up to Rs.1.5 lakh on the principal amount of home loan repaid. They can also claim deduction of up to Rs.2 lakh under section 24 for the interest paid on the home loan. Furthermore, first time home buyers can avail benefit of up to Rs.50,000 under section 80EE. Home loan for renovation of the house is also eligible for deduction.
6) Children’s expenses
Tuition fee paid for your children is eligible for deduction under section 80C. Interest paid on loans for higher education is eligible for deduction under section 80E with no limit on the amount. parents of girl child under the age of 10 can also invest in Sukanya Samriddhi Yojana to claim deduction under section 80C.
7) Saving deposits
The Budget 2019 raised the TDS threshold for bank and post office saving accounts from Rs.10,000 to Rs.40,000. However, income from interest will still be taxable as per income tax laws under income from other sources.
Section 80G of the income tax act allows deduction for contributions made towards certain charitable institutions. Payment made only in the form of cash or cheque is eligible for deduction. Taxpayers can claim deduction of up to 100% or 50% depending on the institution.