Ways To Reduce Tax Outgo Under Income Tax Act 1961
Taxpayers who file income tax under the old regime had a slew of legitimate means to claim tax deductions under the Income Tax Act of 1961. Taxpayers who filed income tax under the old regime had a slew of legitimate means to save money due to the Income Tax Act of 1961. Section 80C of the Income Tax Act of 1961 is among the most widely known deductions. Only if a person prefers the old/existing tax regime in a given fiscal year will he or she can claim the deduction under this clause. Individuals who prefer the current tax concessions, on the other side, will not be able to claim an exemption under this clause. Hence, below are the ways by which you can lower your taxable income.
Exemptions under section 80C
This is among the most popular deductions available under tax law. Section 80C of the Income Tax Act of 1961 allows individuals to claim a tax benefit of Rs 1.5 lakh. You can subtract Rs 1.5 lakh from your gross taxable income if you can disclose annual investments of rs 1.5 lakh. Tax-saving Fixed Deposits, Public Provident Fund (PPF), ELSS, National Saving Certificate (NSC), tuition fees, life insurance premiums, National Pension Scheme (NPS), home loan reimbursement, EPF, Senior Citizens' Savings Scheme, and Sukanya Samriddhi Yojana are some of the initiatives that are eligible for deduction.
Additional exemptions under section 80CCD (1B)
You can deduct an additional Rs 50,000 for contributions to the National Pension System under Section 80CCD (1B) in addition to the Rs 1.5 lakh under Section 80C. (NPS). Individuals can invest in both equity and debt funds under this scheme, which lets them create a retirement portfolio. At the age of 60, the entire amount can be withdrawn.
Exemptions under section 80E
Under this clause, you can claim a tax exemption for interest paid on an education loan for yourself, your spouse, your children, or any student for whom you are a legal guardian. There is no limit on the amount that can be claimed as a deduction in a given year. You can seek the exemption from the year you begin repaying the education loan and lasting for the next seven years, or until the entire interest is paid, whichever comes first. Furthermore, this tax exemption is only possible if the loan is borrowed by an authorized financial institution rather than a family member or friend.
Exemptions under section 80D
An individual or a HUF can seek an exemption of Rs 25,000 for medical insurance premiums paid in a calendar year. Health insurance premiums paid for yourself, your spouse, your children, and your parents can all be deductible. It's worth remembering that, if your parents aren't senior citizens, you can get an additional deduction for their insurance up to Rs 25,000. (above the age of 60). The exemption amount is expanded to Rs 50,000 if the parents are over 60 years old. The overall exemption available in a case where both the taxpayer and the parents are above the age of 60 is Rs 1,00,000. In addition, Section 80(D) allows an exemption of Rs 5,000 for preventive check-ups conducted on the taxpayer, spouse, minor children, and parents during the subsequent year. You can also look at some sections for additional deductions, such as Section 80(DD), Section 80(DDB), and Section 80(U) respectively.
Exemptions under section 24
You can seek an interest payable as a tax deduction under Section 24 of the Income Tax Act if you have an existing home loan. The overall amount that can be claimed as a deduction is Rs 2 lakh per annum. Besides that, under Section 80(EE) of the I-T Act, you can claim an additional deduction of Rs 50,000 in addition to Rs 2,00,000. There are, however, certain requirements that must be fulfilled in order to assert this additional deduction. If the property is rented, and you have not owned it, there is no upper ceiling, and you can subtract the full interest rate as a tax break. The stamp duty value of the house must be less than Rs 45 lakh in order to be eligible for this deduction. In addition, the home loan must be issued between April 1-2019, and March 31, 2020.
Exemption against interest earned on savings accounts
An individual or a HUF can claim a total exemption of Rs 10,000 for interest income from a bank, co-operative society, or post office savings account. Clearly speaking, under Section 80TTA of the Income Tax Act, interest on savings accounts is tax-free up to Rs 10,000 annually. And there's Section 80 (TTB), which enables senior citizens to claim a deduction of up to Rs 50,000 from interest income.
Exemption against donations
To raise your tax benefit you can also contribute or donate to charities. Various contributions listed under Section 80(G) of the Tax Code are liable for a 100% or 50% deduction. Individuals must be aware, though, that cash contributions above Rs 2,000 are not liable for tax deductions. As a result, making contributions via digital forms is preferable since they would be liable for a tax exemption under Section 80. (G).
Exemption under section 80GG
If you do not get a house rent allowance (HRA) as part of your salary or if you are self-employed, you can claim this exemption. To take advantage of this deduction, you need to fill out Form 10BA. This clause enables you to claim a deduction of up to Rs 60,000.