5 ways to save income tax for salaried employees in India
Several tax payers think that tax deductions would be like investing in NSC or taking an insurance policy. I felt many tax payers might not be aware of the various tax deductions where a tax payer is eligible to claim. In this article we would cover the relevant tax deductions a tax payer is eligible and various ways to save income tax for salaried employees in India.
Ways to save income tax for salaried employees – U/S 80C
- There are various tax saving schemes, where a tax payer can invest and get tax exemption u/s 80C. The amount eligible U/S 80C is up to Rs 1 lakh.
Tax saving schemes u/s 80C (Eligibility up to Rs 1 lakh)
- PPF: Investment can be done in Public provident fund (PPF) up to Rs 100,000 per annum. The PPF account needs to be maintained for a period of 15 years.
- NSC: Investment in NSC can be done at any amount up to Rs 1 lakh. NSC are currently available for 5 years and 10 years period
- ELSS: Equity linked saving is another option to save tax. The period of investment should be for 3 years.
- Tax saver fixed deposit: There are various tax saver fixed deposits available. Choose the best one to maximise the returns. The period of investment is 5+ years.
- Life insurance premium: Life insurance premiums paid in the year would be eligible for tax deductions.
- ULIP: Unit linked insurance plans is another combination of insurance + investment. Investment in such ULIP would also be eligible for tax deductions.
- Provident Fund: Any amount paid by employer for provident fund would be eligible for tax deduction in this section.
- New Pension scheme (NPS): Amount invested in NPS would be eligible for tax deduction under this section (Section 80CCD). You can refer our article on this subject.
Please note the above all put together is eligible for Rs 1 lakh tax deductions u/s 80C
Ways to save income tax for salaried employees – U/S 80D (Medical insurance up to Rs 30,000)
- Many of us take health care insurance / medical insurance, but I feel we never claim the tax deduction u/s 80D. Any medical insurance premium paid would be eligible for tax deduction up to Rs 15,000 (Up to 65 years of age) and Rs 20,000 for senior citizens. Also any additional medical insurance premium paid for parents up to Rs 15,000 would also be eligible for tax deduction as per this section.
Ways to save income tax for salaried employees – U/S 80DD (Medical treatment)
- Medical treatment of handicapped dependent up to Rs 50,000 is eligible for tax deduction u/s 80DD. However under severe medical condition the amount eligible for tax deduction is Rs 100,000
Ways to save income tax for salaried employees – U/S 80DDB (Treatment for specific diseases)
- Treatment for specific diseases would be eligible for tax deduction up to Rs 40,000 up to 65 years of age and Rs 60,000 for senior citizens.
Ways to save income tax for salaried employees – U/S 80GG (Rent paid up to Rs 24,000)
- Some of the employers would not be paying HRA as part of the salary structure especially in smaller companies. In such case, tax payer can get tax deduction for the rent paid up to Rs 2,000 per month. Thought there is a provision for this section, mostly it would be underutilized as the tax payer’s fall under this bucket would not be paying any tax due to less income.
Conclusion: Tax payers should come out of the mindset that investing in PPF or NSC are the only tax deduction options available. Considering all the eligible options would help in reducing the tax.
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