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How to Save Income Tax? - Complete Guide

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How to Save Income Tax
November 05, 2018

Table of Content

 

There are so many ways of saving income tax slab rates and ensuring you are able to manage your income better.

Ways to save tax under Section 123 & Section 126 of the Income Tax Act, 2025 (corresponding to sec 80c and 80d of the Income Tax Act, 1961).

  1. Make eligible investments/payments of upto ₹1.5 lakh and claim a deduction from total income under Section 123, subject to the specified conditions and eligible investments/payments listed in Schedule XV to reduce your taxable income (corresponding to section 80c of the Income Tax Act, 1961).

  2. Buy Medical Insurance & claim a deduction up to Rs. 25,000 for self, spouse, and children (Rs 50,000 for Senior Citizens); an additional ₹25,000 (₹50,000 if parents are senior citizens ≥ 60 years above) for medical insurance premium under Section 126 of the Income Tax Act, 2025 (corresponding to Section 80D of the Income Tax Act, 1961).

  3. Claim deduction upto Rs 50,000 on Home loan interest under Section 130 of the Income Tax Act, 2025 (corresponding to Section 80EE of the Income Tax Act, 1961), subject to the prescribed conditions including the loan being sanctioned between 1 April 2016 and 31 March 2017, the sanctioned loan not exceeding ₹35 lakh, the value of the residential house property not exceeding ₹50 lakh, and the assessee not owning another residential house property on the date of sanction.

Other investment options.

A home loan would also help you in reducing your taxable income as the principal portion of home loan can be claimed under Section 123 up to Rs 1.5 lakhs in a tax year subject to prescribed conditions and the interest portion can be claimed as a deduction from income from house property upto ₹2 lakh for the self-occupied property under Section 22 of the Income Tax Act, 2025 (corresponding to Section 24(b) of the Income Tax Act, 1961), subject to satisfaction of conditions prescribed. Where these conditions are not fulfilled, the cap is restricted to ₹30,000.

Use the following pointers to plan your tax-saving for the year:

  1. Check the tax-saving expenses that you're already making that you can claim. This includes expenses like insurance premium, children's tuition fees, EPF contribution, home loan repayment etc.

  2. Deduct this amount from 1.5 lakh to figure out how much to invest. The entire amount doesn't need to be invested if expenses are covering it.

  3. Choose tax-saving investments on the basis of your goals and profile. ELSS funds, PPF, NPS and fixed deposits are some of the popular options.

It will help you understand how much you need to invest to save taxes. It is advisable to spread your investments throughout the year. This will reduce the financial burden and help you make informed decisions.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Here's all you should know about life insurance.

We help you to make informed insurance decisions for a lifetime.

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We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

Disclaimer:

NOTE: Tax benefits & exemptions are subject to the conditions of the Income Tax Act, 2025 & the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

Note:

If assessee has opted for Old tax regime, assessee shall be eligible to claim deduction under Chapter VIII of the Income Tax Act, 2025 (corresponding to chapter VI-A (like Sections 80C, 80D, 80CCC, etc) of the Income Tax Act, 1961). If assessee has opted for New tax regime then only few deductions under Chapter VIII are available, specifically under Section 124(1) & (2), Section 125(2), and Section 146 of the Income Tax Act, 2025 (corresponding to Chapter VI-A such as Sections 80JJAA, 80CCD(2), 80CCH(2) of the Income Tax Act, 1961) are available.

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