People are always on the lookout for opportunities to save income tax. No one likes to miss out on options that can save them money paid as tax. Different people prefer different ways of doing so.

This year the tax filing deadline for salaried individuals is 31st July 2021. But if all your calculations and documents are ready then file your income tax return without waiting for the last date or extension.

Along with filing returns of last year, you should also start tax planning for the current financial year. I will share some tips to save income tax that’s not commonly known to everyone.

1. Tax Deduction In Case of Availing a Home Loan

You can save tax if you plan your home loan wisely in accordance with section 80C. For the principal amount, the limit is Rs. 1.5 lakhs as per section 80C and for the interest amount the limit is Rs. 2 lakhs as per section 24. Tax Saving Options under Sections 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80CCG, 80G

2. Interest Income on Saving Account

(Tax Saving Under Section: 80TTA/80TTB)

Max Tax Saving Limit – Rs. 10,000 under TTA and Rs. 50,000 under TTB

Section TTB is applicable for senior citizens and TTA for other individuals less than 60 years of age. 

If you are less than 60 years of age then, the interest earned on savings accounts is not taxable up to Rs. 10,000 under section 80TTA.

3. Income from Agriculture

Any kind of income from agricultural land defined as per section 10(1) is exempted from tax. Such an income can be related to rent from land, revenue from land, the amount generated through agriculture products, and the amount through a farm building.

4. Maturity or Claim Amount Received on Life Insurance

If you hold a life insurance policy issued prior to 1 April 2012 then 

Any proceeds received on account of maturity or amount received as bonus of an insurance policy is exempt from tax only if the premium paid does not exceed 20% of the sum assured.

If the sum assured is less than the said value, the entire maturity proceeds would be taxable.

For policies issued after 1 April 2012

The premium paid in respect of such policies should not exceed 10% of the sum assured.

In case you bought the policy after 1 April 2013 and the policy covers disability (as referred u/s 80U) or specified disease (as per section 80DDB), then in order to claim the deduction, the premium should not exceed 15% of the sum assured.

5. Provisions under Section 80C

In order to encourage savings, the government of India offers a provision to invest Rs. 1,50,000 as per section 80C of the Income Tax Act. Therefore, by investing in tax-saving options under 80C, you end up saving money on income tax as well as make investments for a secure future. Here’s a list of popular investment options to save tax under section 80C.

6. Interest Income on NRE Account

Indian Government provides tax incentives to attract investments from NRIs. Individuals with deposits in an NRE account don’t have to pay tax on interest income earned on these deposits.

Some Indians residing abroad borrow loans from their resident foreign country at 3-4% and invest it in India through an NRE account and earn tax-free income on deposits at 5 – 6.75%.

There is an exception to this provision – If the individual has lived in India for more than 182 days during the financial year, his interest income from NRE deposits will become taxable.

7. Profit from Selling Shares or Equity Mutual Funds

Only after 1-year holding (Long Term Capital Gains)

Maximum Tax-free Gains: Rs. 1 Lakh

If you invest in stocks or mutual funds then you can make your profits 100% non-taxable up to Rs. 1,00,000.

Same is applicable to equity mutual funds

Remember any long term capital gain over Rs. 1 Lakh attracts a tax of 10%. Further, in such case, you will not be able to avail indexation benefits.

Expert Tip – If you have long term or short term loss in equity, make sure you file your return in time so that you can carry forward your losses. 

You will be able to set off future gains against these losses. But you will not be able to carry forward any losses if you miss the return deadline date.

8. Extra Contribution to National Pension Scheme

Usually, contributions to the National Pension Scheme fall under Section 80C, where there is a limit of Rs. 150000. However, you can opt to invest Rs. 50000 more in the National Pension Scheme, as this amount will be tax-free.

9. Amount from Provident Funds

Interest received on the provident fund is not taxable. Wait for five years before you withdraw the amount from your Provident Fund.

10. Loan for Education Purposes

This comes under section 80E of the Income Tax Act. The interest amount paid against an education loan is not taxable. There is no specified limit for such a category.

11. Health Insurance Premium

Section 80D is a dedicated section for health insurance tax deductions. A certain portion of the money paid as health insurance premium is not tax-deductible. This amount keeps changing on an annual basis. Premium paid for buying health insurance for senior citizens can help you save more tax. 

12. Leave Travel Allowance

Employees can make use of this feature to cover travel tickets of spouse, children, and parents. Siblings are covered only if they are dependent on the salaried person. This falls under section 10(5).

13. When HRA is Part of Salary

You should reside in a rented place to avail of this feature and you should possess relevant receipts. It falls under Section 10(13).

14. When HRA is Not a Part of Salary

When HRA is not a part of the salary, the tax benefit can be availed in the following ways: 1) subtracting rent from 10% of income, 2) a flat rate of Rs. 5000 on a monthly basis, 3) 1/4th of total income. These deductions are a part of Section 80GG.

15. Distributed Profit to Partners in Partnership Firms

There is no tax in the hand of partners if their partnership firm is making profits and partners decide to distribute profits among themselves.

Partners get tax benefits because their partnership firm has already paid taxes on the profits.

16. Travel/Hotel Expenses in Business

Business owners can file travel and hotel expenses as business expenses to save tax. Businessmen never pay for travel from their salary but from the company account.

17. Food Expenses in Business

Similarly, business owners need to meet so many people like customers, vendors, and potential hires. Often he spends money on paying bills on food.

They save tax by showing all food expenses as the business expense.

18. Amount Received as per Voluntary Retirement Scheme

A lot of people choose to opt for Voluntary Retirement and take a pay-out. The amount received as per the Voluntary Retirement Scheme is not taxable till the limit of Rs. 5 lakhs.

19. Amount Received from Gratuity

Money received as gratuity is tax-free up to a limit. The limit for tax-free gratuity is Rs. 20 lakhs.

20. Coupons for Food

Food coupons or meal coupons as they are commonly known are not taxable to a limit. They are non-taxable up till Rs. 2600.

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