Tax saving options " Paisa bachao, Paisa Kamao" - by CA Guddia Prajapat

When someone says tax returns, our brain switch just turns off, thinking who will do those complicated calculations. But just think about it. We are already paying so much taxes on food, travel, entertainment and what not .  So when there is an option to save your hard earned money, why not research a little bit and save your money . It's not salary that makes you rich, it's your saving habits.

Money speaks only one language - "If you save me today, I will save you tomorrow. " So save your money with better tax planning.

So let us quickly understand what is tax?

In simple words , its tax on your income. The rate of tax depends on your slab of income, residential status and your age. Tax rates also varies depending upon whether the assessee is individual,  HUF , company or other entity.

Now, after knowing what is income tax, let's understand what are the various options to reduce your tax liability,

1. House rent allowance (HRA) 

Its basically declaring rental expense and reducing your income . The rent which is paid can be reduced from your salary component, thereby reducing your tax. HRA is calculated on least of the following :

• HRA from employer (Allowance in your salary slip)

• 50% of your salary* (40% in case of non- metro city)

• Actual Rent paid to landlord (less) 10% of your salary*

*Salary means Basic + Dearness allowance forming part of retirement + sales commission, if any

2. Home loan : 

So if u have taken housing loan, congrats you can save further taxes through proper planning. Interest paid upto rupees 2 lakhs is allowed to reduce from your salary and principal payment is allowed under section 80C of Chapter VI-A deductions which are discussed below.

3. Deductions 

Part I : 80C Deductions:

So there are various deductions under section 80C to reduce your taxability by either of the below options :

1. NPS- National Pension Scheme
2. LIC Premium
3. Tution Fees
4. Housing loan principle
5. PPF
6. Tax Saving FD of 5 years
7. Provident fund and,
8. Equity linked savings scheme so on...

You might feel so many options with questions in your mind like where to invest, which is better, what return you will be getting and so on. Don't worry, I have discussed in detail about all these options in another article by comparing returns, liquidity and tax on maturity

Part II : Other than 80C Deductions:

80D - One can claim deductions for health insurance for self , spouse, parents and dependent children's. Maximum deduction of Rs. 25000 is allowed for other than parents  whereas for parents separate deduction of Rs. 25000  is allowed. The limit is increased to Rs. 50000 for senior citizen for both the above options for FY 2019-20.

80E - The interest paid (not principal) on education loan can be claimed as deduction under this section for 8 years provided the loan was taken for HIGHER education for self, spouse, children or any student for whom assessee is legal guardian.

80G - Deduction can be claimed on donations made to various institutes provided certain conditions are satisfied.

80TTA - Interest on savings account held in bank/post office or with cooperative society to the extent of Rs.10000 for FY 2019-20.

These are some of the few ways to save your money. Keep in mind "Financial planning is most important for your success towards health and wealth."

Happy Reading !

Disclaimer : Images are taken from Google

CA Guddia Prajapat

About the Author : 

She is a qualified Chartered Accountant and a passionate learner. Her passion towards finance and taxation makes her articles more interesting. She personally believes that knowledge increases by sharing and not by saving.