You may have just finished filing your income tax for the year. And almost immediately you need to start to plan for saving taxes in the current financial year as well. There are many investment and savings options that can help you with this. Some of your expenses may be tax-exempt.
Some of the tax-saving tricks that every taxpayer must know are mentioned below. But, you need to consult a tax lawyer to help you with all the planning.
Exemption of medical bills
Before FY 2018-19, you had to save all your travel and medical exemption to get any exemption. It has now changed as a standard deduction of ₹40,000 is available without presenting any bills.
Utilize the whole limit under Section 80C
You can claim as much as ₹1,50,000 as a deduction under the section 80C of the Income Tax Act. Make sure that you utilize the entire limit available to you. Here are some of the investment options and expenses that you can use to be eligible for this:
- Public provident fund
- National saving certificate
- The principal repaid of your home loan
- Employee provident fund
- Life insurance premium
- The tuition fee of your children
- Equity-linked saving scheme
- 5-year fixed deposit, remember that you effectively earn the highest fixed deposit interest on tax-saving deposits.
Tax exemption on house rent
You may have a house rent allowance as part of your salary. Based on the rent you pay; it may be tax-free. Even if you do not get an HRA, you can still claim a tax deduction on the house rent you pay under Section 80GG. The amount eligible for deduction is the least among:
- The actual amount provisioned as HRA
- Actual rent paid minus 10% of your basic salary
- 50% of your basic if you live in a metro, 40% otherwise.
Leave travel concession
Under Section 10(5) of the Income Tax Act, you can claim LTA exemption for the actual travel costs incurred for your family and you – when you take a vacation. Remember that you can claim LTA for two trips in a block of 4 years.
Under Section 80G of the Income Tax Act, you can claim 100% or 50% of donations you make to recognized charities as a deduction. Any donation over ₹2,000 has to be made through channels other than cash. Further, the total deduction for cash donations is capped at ₹10,000.
Get a health cover
The premium that you pay towards health cover for yourself, spouse, children, and dependent parents can be claimed as a deduction under Section 80D of the Income Tax Act. You can also claim up to ₹5,000 towards preventive health check-up.
Contribute to pension funds
Under Section 80CCC of the Income Tax Act, you can claim a deduction of up to ₹1,50,000 per annum towards contribution made to a recognized pension fund. You can also avail tax benefit on withdrawal from pension funds if you withdraw up to 30% of your accumulated funds.