Tax Saving Tips for an Annual Income of Rs. 7 Lakhs

 

Union Budget 2023 brought changes to tax laws, raising tax slabs to Rs. 7 Lakhs. The new regime offers tax-free income up to Rs. 7 Lakhs, a higher rebate of Rs. 25,000, and eliminates several deductions. The old regime with deductions is optional.

5 Tax-Saving Tips for an Annual Income of Rs. 7 Lakhs

If you do opt for the old tax regime, here’s a list of the  tax-saving options you can use to reduce your tax liabilities:

1. Prefer buying a Life Insurance Policy. 

Life insurance offers future financial security and current tax-saving benefits. You can claim up to Rs. 1.5 Lakhs of premiums as tax deductions under section 80(C), and the death benefit payout is tax-free u/s 10(10D). 

2. Invest in Tax-Saving Investments

Investing in various tax-saving investments can help you build a sizable corpus while lowering your tax liability. ELSS (Equity-Linked Savings Scheme), National Savings Certificate, and PPF (Public Provident Fund) are some of the best tax-saving options that bring you up to Rs. 1.5 Lakh deductions u/s 80(C). Similarly, reducing income tax on pension scheme investments. The old regime also offers an additional deduction of Rs. 50,000 u/s 80CCD for National Pension Scheme investments. To enjoy deductions on market-linked investments, you can buy a ULIP online. 80 (C) tax deductions bring you savings on premiums, while the plan’s market-linked assets bring higher returns. 

3. Opt for a Health Insurance Plan 

Healthcare plan purchase saves on tax liabilities. Deductions u/s 80 (D) for premiums are available based on the insured's age. 

Here’s an overview of the applicable deduction rates:

• Health insurance for self, spouse, children, and parents (under 60 years) - up to Rs. 25,000

• Health insurance for senior citizens (over 60 years) - Up to Rs. 50,000

  4. Capitalise on Home Loan Payments 

Availing of a home loan under the old tax regime will bring you tax benefits u/s 80(C) and 24(b). U/s 80(C), you can claim tax deductions of up to Rs. 1.5 Lakhs for payments made to clear the principle borrowed, while section 24(b) offers deductions on home loan interest payments for both self-owned and rented properties upto Rs. 2 lakhs, subject to certain specified conditions

5. Donate to Charity 

U/s 80 G, you can also save on tax liabilities by donating to charitable institutions. Payments made to certain charitable institutions are eligible for 50%-100% deductions without any maximum qualifying limit, while others may have a maximum qualifying cap. 

Conclusion 

With the new tax regime, you can enjoy freedom from tax payments if your income doesn’t exceed the Rs. 7 Lakh threshold. However, if you choose the old regime, you can use the above mentioned tips to lower your tax liabilities effectively.

Related Articles:

• What is Self Assessment Tax and how to pay it online?
• Tax Savings Strategies for Salary above Rs 30 lakh in India
• Tax regimes for a 12-lakh salary: Which one’s better?
• How to Retire Early Using the F.I.R.E Method?
• Annuity Plan - Meaning, Types, Taxation and Calculation
• How to Choose the Best ULIP Plan in India?

ARN: INT/ED/08/23/4261