Saving Income Tax | There are many ways to save income tax. There is no tax on certain types of income. Also, you can save tax by making some kind of expenses or investments.

You can divide income tax saving methods into 5 parts.
  1. Income on which you do not have to pay tax (Exempt Income)
  2. Tax benefits under Section 80C
  3. Health insurance and health checkup under section 80D
  4. Special Tax Benefit for Senior Citizen
  5. Other Tax Benefit




Saving Income Tax | Income on which you do not have to pay any tax (Exempt Income)

#1.)  Standard deduction up to Rs. 50,000 (Rs. 50,000)

If you get a salary, then you can get a tax benefit of Rs 50,000 per year like this. You do not need to provide any proof.

Even if you are a senior citizen and get a pension, you can still take advantage of Standard Deduction.

But if you are self-employed, then you will not get any tax benefit.

#2.)  Payment from Sukanya Samridhi Account

Any payment received from an account opened in accordance with the Sukanya Samridhi Account Rules, 2014, made under the Government Saving Bank Act,1873, shall not be included in the total income of the assessee.

#3.)  Educational Scholarships

The scholarships granted to meet the cost of education would be exempt from tax in the hands of the recipient irrespective of the amount or source of scholarship.

#4.)  Specified Income of a Sikkimese Individual

The following income is exempt which accrue or arise to a Sikkimese individual, would be exempt from Income Tax-
  • Income from any source in the State of Sikkim; or
  • Income by way of dividend or interest on securities.
However, this exemption will not available to a Sikkimese woman who, on or after 1st April 2008, marries a non-Sikkimese individual.

#5.)  Interest on PPF / EPF / Tax-Free Bond


No tax is to be paid on interest received on PPF, EPF or tax-free bonds.

#6.)  If you work and get HRA, then tax benefit (HRA) on house rent allowance

If you do a job, then you probably already know a lot about it.

HRA is a part of your salary. You can learn about this by reading your salary slip.

The tax benefit on HRA is found under Section 10 (13A) and Rule 2A of the Income Tax Act.

Note that the entire HRA is not tax-free. Some parts are exempted.

Let us see how it is calculated that you will get the tax liability.

First, find out these three numbers.
  1. House Rent Allowance (HRA or House Rent Allowance)
  2. Rent - 10% of Basic Salary (Rent - 10% of basic salary)
  3. 40% of Basic Salary. If you are staying in a metro city (Delhi, Mumbai, Chennai, and Kolkata), 50% of Basic Salary.
You get tax benefits on the lowest among these three numbers.

You can also save tax on the rent of the house

#7.)  Leave Travel Allowance (LTA)

You can also take this only if you get a salary and you get LTA in your salary.

If you travel with your family in the country, then that cost will be tax-free for you. This means some part of LTA (equal to your expenses) becomes tax-free.

Note that you can take advantage of LTA only 2 times in a block period of 4 years.

#8.)  Exemption in respect of Commuted Pension

If you are receiving a pension from your employer, it is not taxable fully. Despite this, the assessee can avail deduction to the extent as given below.
  • If you have a government job, your commuted pension is fully exempt;
  • If you don't have a government job, your deduction shall be as given below
    • If the employee is in receipt of gratuity
    - Exemption=1/3rd of the amount of pension which he would have received had he commuted the whole of the amount
    If the employee is not  in receipt of gratuity
    - Exemption=1/2 of the amount of pension which he would have received had he commuted the whole of the amount

#9.)  Exemption in respect of Gratuity

If you are receiving a Gratuity from your employer, it is not taxable fully. Despite this, the assessee can avail deduction to the extent as given below.
  • If you have a government job, your Gratuity is fully exempt;
  • If you don't have a government job, your deduction shall be as given below
    • If the employee is covered by the Payment of Gratuity Act, 1972
    - Exemption=the least of the following
    1. 20,00,000
    2. Actually received the amount of Gratuity
    3. 15days' salary based on last drawn salary for each completed year of service or part           thereof in excess of 6 months
    If the employee is not covered by the Payment of Gratuity Act, 1972
    - Exemption=the least of the following
    1. 20,00,000
    2. Actually received the amount of Gratuity
    3. Half month's salary (based on the last 10 months' average salary immediately preceding the month of retirement or death) for each completed year of service.

Saving Income Tax | The premium for Health Insurance and Preventive Health Check (Section 80D) (Health Insurance and Health Check-up)

Rs 25,000 per year for the health insurance premium and health check-up for yourself, spouse and children. If you or your spouse is over 60 years, then this limit is Rs 50,000.

25,000 for health check and health insurance premiums for parents and this Rs. 25000 shall increase to Rs. 50,000 in case your parents are senior citizens.

For the welfare purpose, if senior citizens are unable to get health insurance coverage, deduction of up to Rs. 50,000 would be allowed in respect of any payment made on account of medical expenditure in respect of such person.


Saving Income Tax | Interest on Savings Bank Account (Interest Income on Savings Bank Account) (Section 80 TTA)

You do not have to pay tax on interest up to Rs 10,000 on a savings account. Interest on Savings Accounts exempts up to Rs. 10,000 per financial year

If you have collected more than Rs 10,000 interest in all the savings accounts in a financial year, then you will have to pay tax on the additional interest as per your tax bracket.

This lies only on savings accounts opened in a bank, co-operative bank or post office.

Note that the tax benefit under this section is only on the interest received on savings accounts. There is no exemption under Section 80TTA on the interest of fixed deposits.

If you are over 60 years of age (Senior Citizen), then you cannot avail benefits under Section 80TTA. This is because senior citizens get more tax benefits under Section 80TTB.

Saving Income Tax | Interest up to Rs 50,000 for Senior Citizens (Section 80 TTB)

The tax benefit under this section is only for senior citizens or senior citizens.

People below 60 years of age cannot avail Section 80TTB.

You get a tax benefit on a savings account or fixed deposits up to Rs 50,000 interest. Interest on Savings Account and Fixed Deposit exempt up to Rs. 50,000 per financial year for senior citizens

If you have received more than Rs 50,000 interest, then you will have to pay tax according to your tax bracket on the additional interest.

This is applicable only on savings accounts or fixed deposits opened in a bank, co-operative bank or post office.

If you have invested in a fixed deposit or debenture of a company, you will not get any tax benefit on its interest.

Saving Income Tax | Gift up to Rs 50,000 per year

You do not have to pay tax on gifts up to Rs 50,000 per year.

If you get a gift of more than Rs 50,000, then you have to pay tax on the additional amount according to your tax bracket.

There will be no limit of Rs 50,000 per year on you in these three cases:
  1. If you have received this gift from a close relative.
  2. Got it at the time of marriage.
  3. It is inherited after one's death.


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DISCLAIMER 

The information provided in this article is for general informational purposes only. All efforts have been made to provide accurate information in this document, however, it should not be perceived as professional or legal advice. The reader should consult a professional before making any decision based upon this document. Under no circumstance, the author nor the publisher shall have any liability to you for any loss or damage of any kind incurred as a result of the use of this information.