How Salaried And Non-Salaried Persons Can Save Tax: When the return filing date nears, the taxpayers search for ways to shell out the tax amount for the ongoing financial year. They tend to find ways to make a significant deduction on their taxable income. The Government makes several deductions available for both the salaried and non-salaried taxpayers that can help them to save some amount of tax.
Before planning on saving taxes, one should have a proper understanding of tax slabs, taxable income, and the deductions on tax available to the taxpayers. One should have proper tax planning at the beginning of the financial year to avoid mistakes. They should break each component of their income to find ways to save tax. Proper investment planning must be done to avail the deductions on the income.
This article will discuss ways to save tax and the deductions that are available to the taxpayers.
- Deductions for Saving Tax
- Deductions Under Section 80 C
- Deductions under Section 80 CCC
- Deductions Under Section 80 CCD (1)
- Deduction Under Section 80 D
- Deductions Under Section 80 E
- Deductions Under Section 80 G
- Deductions Under Section 80 GG
- Deductions for Loss From House Property
The best way to save tax is to make investments on which the Government allows deductions as per the rules of the Income-Tax Act. A person must have proper knowledge of these deductions and investments. Here is the list of the deductions available for the taxpayers.
The deductions available under section 80 C are most popular among the taxpayers. These deductions are common for all and help save a significant amount of tax. Both the salaried and the non-salaried taxpayers can avail deductions available under section 80 C. The deductions under section 80 C is not available for companies, LLPs, and Partnership firms. The maximum limit up to which a taxpayer can avail deduction is ₹1,50,000 in a particular financial year. The investments on which deductions under 80 C are available are as follows:
- Investments made in Public Provident Funds (PPF)
- Investments in Employer’s Provident Fund Scheme (EPF)
- Payment towards Life Insurance Premium in Life Insurance Corporation of India (LIC)
- Investments in Equity-linked Saving schemes
- Payment made towards Principal amount of home loans
- Payment made towards registration charges for purchasing property
- Investment made in Sukanya Samriddhi Yojna (SSY) in Post office
- Investment in National Saving Certificate (NSC)
- Investment in Senior Citizen Saving schemes
- An investment made in tax saving FD for five years.
Section 80 CCC is a subsection of section 80 C. Under this section, the Income-tax department allows deductions for payments made towards Annuity Pension Plans, Pension amount received from Annuity, and interest or bonus accrued on the Pension amount.
Section 80 CCD(1) is yet another subsection section 80 C. Here deduction is allowed on Employee’s contribution and is least from among the following:
- 10% on salary for salaried taxpayers.
- 20% of gross total income, in case the individual is self-employed.
- ₹1,50,000 deduction allowed under section 80 C.
It should be noted that the amount of deduction under 80 CCD(1) would be the least of the three amounts mentioned above.
Deduction under section 80 D speaks of the premium paid towards medical insurance. A person being an individual or a HUF (Hindu Undivided Family) can claim deductions of up to ₹25,000 under section 80 D. A person can also claim an additional deduction of ₹25,000 on medical insurance paid for parents if the parents are below 60 years of age. Again, if the parents are aged above 60 years, a deduction of ₹50,000 can be claimed by the taxpayer.
A taxpayer can claim deduction under section 80 E for payment made towards interest on education loans. The education loan can be taken for the taxpayer himself, or spouse or children or any other person for whom the taxpayer acts as a legal guardian. The taxpayer can claim a deduction of up to 100% of the interest amount paid.
Deductions under section 80 G are subjected to donations made to various Government institutions and charitable trusts. A person can claim deductions under 80 G for up to 50% or 100% of the amount donated, depending on various threshold limits. The deductions can only be claimed if the donations made exceed ₹2,000 and are made in any mode other than cash. It should be noted that Cash donations do not qualify for deductions.
Deductions under section 80 GG speaks of payments made towards house rent. A taxpayer can claim deductions under section 80 GG if they have paid rent for the financial year and have not received any House Rent Allowance. Points that are to be considered to avail deductions under section 80 GG are as follows:
- The Taxpayer, their spouse or minor child should not have any residential property registered in their name.
- The taxpayer must be staying on rent and paying rent regularly.
- The Taxpayer shouldn’t have received any House Rent Allowance.
A taxpayer can adjust losses incurred from house property towards salary income. It can help you save taxes. A deduction of up to ₹1,50,000 can be availed by a taxpayer on interest paid by them on a self-occupied property.