#FinancialBytes: How can salaried individuals save on income tax?
Income tax accounts for a major part of the government's revenue and salaried individuals form a significant chunk of the overall taxpayers in the country. However, many taxpayers are often worried or confused about saving on income tax. Salaried individuals, especially, try to find ways to reduce their tax liability every year. Here's a guide on tax saving for salaried individuals.
There are several incentives/allowances under the Income Tax Act that minimize salaried individuals' liability. For example, salaried individuals can save up to Rs. 1,50,000 on tax under Section 80C. One can claim deductions on payments towards life insurance policies, provident fund, tax-saver fixed deposits, ELSS mutual funds, certain post-office schemes, tuition fees, National Savings Certificate, Senior Citizens Savings Scheme, Sukanya Samriddhi Yojana among others.
Individuals can save on tax under Section 80D on payments towards medical/health insurance policies. One can take health insurance for self/spouse/dependent children and claim exemption of up to Rs. 25,000. If the taxpayer's parents are senior citizens, then the limit is Rs. 50,000 (according to the Budget 2018). If the taxpayer and their parents are senior citizens, then the limit is Rs. 1,00,000.
Under Section 24, individuals can claim tax benefits of upto Rs. 2,00,000 on home loan interest. If the property is rented out, there is no limit for claiming the deduction. Those getting House Rent Allowance (HRA) can claim deduction too; there's no upper limit for HRA deduction. However, those who pay rent can claim only a deduction of upto Rs. 60,000pa under Section 80GG.
Under Section 80G, taxpayers can save on tax by claiming deductions on donations made to charitable organizations. Though there is no upper limit given, there are certain limits set depending on the type of organization one is donating to. For example, 80G provides 50-100% exemption for government relief fund donations and 50% deduction up to 10% of one's income for donations to registered NGOs.
Under the IT Act, individuals also get the benefit of tax-free interest on savings accounts; under Section 80TTA, interest on savings accounts is tax-free up to Rs. 10,000/year. The limit for senior citizens (for FD/savings account interest) is Rs. 50,000 under Section 80TTB.