Home / Health Insurance / Articles / Income Tax / 20 easy ways to save Income Tax in 2024

20 easy ways to save Income Tax in 2024

Team AckoApr 18, 2024

People are constantly looking for ways to reduce their income tax obligations. And there are several ways to do so. If you want to expand your knowledge about tax-saving instruments and taxable income, this article features 20 easy ways to save Income Tax in 2024. Read on to learn more about the new tax regime deductions and tips to save income tax.

Contents

What is Income Tax?
How to save tax?
- Investing money in tax-saving instruments
- Claiming tax benefits from the deducted amount
20 tips to save income tax legally in India
Other Ways To Save Tax than Section 80C
Planning Your Tax-Saving Investments For The Year
Frequently asked questions

What is Income Tax?

A share of your income that you pay to the government is called income tax or income tax deductions. The government uses these funds for administrative purposes.

How to save tax?

It is important to understand what is taxable income in India so that you know about the various ways in which you can save tax. You can reduce income tax deductions from salary in the following two ways.

Investing money in tax-saving instruments

The government encourages citizens to invest in the tax-saving investments mentioned under section 80c Income Tax Act in order to reduce their tax burden. As much as Rs. 1.5 lakhs can be claimed in a particular financial year. In this way, you can ensure you have some sort of investment and stop worrying about spending excessive money on paying taxes.

Here are some examples of tax-saving instruments according to the new tax regime exemption list.

Public Provident Fund
National Pension Scheme
Premium Paid for Life Insurance policy
National Savings Certificate
Equity Linked Savings Scheme
Home loan’s principal amount
Fixed deposit for five years
Sukanya Samariddhi account
Children’s tuition fees

According to the Income Tax Act 80C, these are the best tax-saving investments.

Claiming tax benefits from the deducted amount

Looking for additional tax-saving schemes? In the context of income tax deductions for salaried employees, you have the option to let your employer deduct tax on a monthly basis. If this amount exceeds the expenses made for non-taxable payments, the government will return the balance or extra tax you paid. You must know this if you are looking to do tax planning for salaried employees. You must notify the tax department about this. These are called Income Tax Returns.

20 tips to save income tax legally in India

Go through the following points if you're interested in knowing what is tax planning and learning more about tax savings options in India to reduce your 2023–24 taxes. Note that these points may have some changes based on yearly updates on deductions allowed in the new tax regime.

Tax deduction when taking out a home loan: If you use section 80C of the Income Tax Act to your advantage when structuring your house loan and reducing your taxable income, you can get a benefit of Rs. 1.5 lakhs on the principal amount and Rs. 2 lakhs on the interest paid as per section 24.
Earnings from Interest on Savings Accounts: For a maximum of Rs. 10,000, interest earned on savings accounts is generally tax-exempt. This sum represents the total of all savings accounts. For senior citizens, this cap is increased to Rs. 50,000 under section 80TTB.
Interest received through NRE accounts: Indian citizens who do not reside in India have NRE accounts. They receive interest on both the accumulating and fixed deposit amounts. The amount of interest is referred to as tax-free income.
Money Received from Life Insurance Policy: The maturity amount or bonus is completely free from income tax under Section 10 if the premium is below 10% of the sum assured (if the policy is purchased after 1st of April, 2012). The maturity amount is tax-free for policies purchased before this date if the premium is 20% of the sum assured. Policies issued after April 1, 2013 that cover the life of a person with a disability or a disease listed under Sections 80U or 80DDB, respectively, are also included in this category. In these cases, the amount received at maturity is tax-free as long as the premium is below 15% of the sum assured.
Scholarship for education: Under section 10(16) of the Income Tax Act, any scholarship awarded to deserving students to help with educational expenses is exempt from income tax.
Amount received from shares or Equity Mutual Funds: Long-term capital gains (LTCG) up to Rs. 1 lakh are excluded from income tax on salary if equity mutual funds or shares are sold after being kept for one year or longer.
Wedding gifts: Once you understand what is taxable income, you will know that any kind of wedding present received from direct relatives is exempt from taxation under the Income Tax Act. The most that can be spent on presents from friends or unrelated individuals is Rs. 50,000. Gifts that exceed this amount will be subject to the applicable tax slab.
Income from agriculture: Income from agriculture is not subject to income tax deduction in the new tax regime. However, the Income Tax Act established an indirect taxation method for such income. It is called the partial integration of agricultural and non-agricultural incomes. It intends to impose higher tax rates on non-agricultural income.
Hindu Undivided Family (HUF) and extra income: HUFs are recognised as separate tax entities and are entitled to separate tax exemptions for each of their members, as well as a basic tax exemption of Rs. 2.50 lakh, regardless of the HUF's residency status.
Amount received through inheritance: The money you receive through a will or by being a legal heir is entirely tax-free because India has no inheritance tax.
Provisions under Section 80C: The Indian government provides a provision to invest up to Rs. 1,50,000 under Income Tax 80C in order to promote saving. As a result, investing in tax-saving instruments under the 80c tax exemption allows you to reduce your income tax liability and make investments in the future.
Contributions to the National Pension Scheme (NPS): Typically, Section 80C, which has a ceiling of Rs. 1,50,000, applies to contributions to the National Pension Scheme. To invest an additional Rs. 50,000 tax-free in the National Pension Scheme, however, is an option.
Amount from provident funds: Any interest that is earned on a provident fund is not subject to a tax deduction on salary.
Getting a loan for education: The Income Tax Act's Section 80E applies to this. The amount of interest paid on a student loan is not taxable. There is no established cap for this category.
Health insurance premium: A person may deduct (for taxation purposes) up to Rs 25,000 for their own insurance premium as well as their spouse's and dependent children's insurance premium. If your parents are below 60 years of age, you can deduct an additional/separate amount for their insurance premium up to Rs 25,000; if they are above 60, it can be up to Rs 50,000.
Expenses to treat disabled dependent: The set discount offered by this provision is independent of age and expenditure. The upper limit for deduction from gross income is Rs. 75,000 for 40% disability, and from the total income, it is Rs. 1,25,000 for 80% or above disability. Even if the costs are less than the specified amount, a full deduction is allowed under Section 80DD.
Expenses for treating specific diseases: Treatment for specific diseases comes under the tax benefit investment. According to Section 80DDB of the Income Tax Act, medical costs spent by a person or a HUF for the treatment of a specific disease or ailment are eligible for a deduction under certain conditions and are limited to a certain amount.
Charity donations: For donations given to particular relief funds and charity organisations, you are eligible for a deduction under Section 80G of the Income Tax Act. But under Section 80G, not every donation qualifies for a tax deduction. Only contributions made to designated funds are tax deductible.
Money spent on donations to Political Parties: Tax deductions for money spent making a donation to a political party have no upper limit. These deductions fall under Section 80GGC. Such a donation amount equals a 100% deduction under Section 80GGC and 80GGB for individuals and a company, respectively.
Tax savings for business owners: To avoid tax on annual income, business owners might claim travel expenses as a part of business costs. Business owners can also claim food bills as business costs to avoid paying taxes.

To avoid paying taxes, business owners might claim food bills as business costs.

Other Ways To Save Tax than Section 80C

Wondering, 'how much income is tax free?' Any income figure between 0 to Rs. 3 lakhs is not eligible for any taxes. If your income extends beyond that, there are several ways to save tax. But it's important to know how much tax is deducted from salary in India. When exploring avenues to reduce salary tax liabilities beyond Section 80C, taxpayers often seek alternative deductions available under the Indian tax code. These provisions cater to various financial commitments and expenditures, offering opportunities for tax savings across different domains.

One such option among the numerous tax-free investments involves leveraging medical insurance premiums under Section 80D. Taxpayers can avail of deductions of up to Rs. 25,000 for medical insurance premiums, with a higher limit of Rs. 50,000 for senior citizens. This provision not only incentivises individuals to prioritise their health but also serves as a means of tax relief.

For those with home loan repayments, Section 80EE presents a valuable opportunity to save on taxable income in India. Taxpayers can claim a deduction of up to Rs. 50,000 on home loan interest payments, providing substantial relief amid the financial obligations associated with homeownership.

Moreover, contributions to the National Pension System (NPS) also offer a tax-saving avenue under Section 80CCD. With a deduction limit of up to Rs. 1.5 lakh, taxpayers can simultaneously invest in their retirement while reducing their tax liabilities.

Education expenses can be mitigated through Section 80E, which allows individuals to claim deductions on interest paid towards education loans. This is a good option to look for other than the 80C tax-saving options. This provision reduces the financial strain of pursuing higher education for themselves or their dependents.

Charitable contributions represent another avenue under income tax saving schemes. It comes under Section 80G. By donating to notified institutions or funds, taxpayers can avail themselves of deductions while promoting social welfare.

Under the best tax-saving investments, Sections 54 and 54F offer exemptions to taxpayers in the field of capital gains. Individuals can mitigate tax liabilities by reinvesting capital gains in specified assets, fostering investment and wealth creation.

Section 80EEB incentivises sustainable mobility by offering deductions on interest payments for loans taken to purchase electric vehicles. This measure aligns financial incentives with environmental conservation efforts.

These are some of the best tax-saving schemes in India on which you can capitalise.

Planning Your Tax-Saving Investments For The Year

By initiating early planning, your investments have the opportunity to compound, aiding in achieving long-term objectives. It’s important to perceive tax savings as a supplementary benefit rather than just considering it as a primary objective. Check out the guidelines to carve out the best tax-saving strategies this year.

1. Evaluate existing tax-saving expenses such as insurance premiums, EPF contributions, home loan repayments, etc.

2. Deduct this accumulated amount from the Rs 1.5 lakh limit to determine the necessary investment amount.

3. Select tax-saving instruments according to your risk tolerance. Popular options include ELSS funds, NPS, and fixed deposits.

Starting your investments early in the financial year helps maximise the benefits of the 80C limit.

Also, read:

Frequently asked questions

Following are some common questions and answers about saving income tax in 2024.

What are the five income classifications?

The five income classifications are salary income, revenue from capital gains, profit or gains from a business or profession, income from real estate, and other sources of income. It’s important to know about this classification to understand the different types of tax planning that exist.

What is the lower limit for paying income tax on salary?

The lower limit for paying income tax on salary is Rs 2.5 lakhs as per the old regime. This is the base for an individual below 60 years of age. For people above 60 years, the lower limit is Rs. 3 lakhs; for Super Senior Citizens, the lower limit is Rs. 5 lakhs. The lower limit is Rs. 2.5 lakhs as per the new tax regime, irrespective of the person's age.

Can I save tax for investing money at a post office?

Yes, you can save tax by investing money at a post office. It is one of the best tax-saving schemes in India. You can invest in a five-year time deposit with a post office just like you may in a five-year fixed deposit. The interest rates on a post office time deposit are higher than those on a fixed deposit tax saving instrument.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet. Please consult an expert before making any related decisions based on the content.