5 Ways to Save Tax for Salaried Employees in India

12 Jul 2024 6 mins Tax Planning

5 Ways to Save Tax for Salaried Employees in India

Discover Top 5 ways to save tax for salaried employees in India in 2024. Learn tax-saving tips beyond Section 80C, 80D, 80E, 80G, 80GG, and 80TTA and maximize your income tax savings.

1. Utilize Section 80C Deductions

Section 80C of the Income Tax Act offers a range of deductions up to RS.1.5 lakh. Popular options include:

Employee Provident Fund (EPF):

Employee Provident Fund (EPF) is a savings scheme initiated by the government to help employees save a portion of their salary for post-retirement benefits. The EPF is managed by the Employees' Provident Fund Organisation (EPFO) and is mandatory for employees earning up to a certain salary threshold.

Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a popular long-term investment scheme in India, backed by the government, offering attractive interest rates and tax benefits. It's designed to provide a secure retirement corpus while encouraging savings among citizens.

Life Insurance Premiums

Life insurance premiums are the payments made to an insurance company to keep a life insurance policy active. These payments ensure that the insurance company can provide the agreed-upon financial benefit to the policyholder's beneficiaries in the event of the policyholder's death. Understanding life insurance premiums is crucial for making informed decisions about financial protection for your loved ones.

Equity-Linked Savings Scheme (ELSS)

An Equity-Linked Savings Scheme (ELSS) is a type of mutual fund that primarily invests in equity and equity-related instruments. It is known for its dual benefits of tax savings and potential for high returns, making it an attractive investment option for individuals looking to build wealth while reducing their tax liability.

2. Explore Section 80D for Health Insurance Premiums

Under Section 80D, you can claim deductions for health insurance premiums:

  • Self, Spouse, and Children: Up to Rs.25,000.
  • Parents: An additional Rs.25,000 if they are below 60 years, and Rs.50,000 if they are above 60 years. This not only helps you save tax but also ensures financial protection in case of medical emergencies.

3. Claim House Rent Allowance (HRA)

If you live in a rented house, you can claim House Rent Allowance (HRA) to reduce your taxable income. The exemption is calculated based on the lowest of the following:

  • Actual HRA received.
  • 50% of your basic salary if you live in a metro city (40% for non-metros).
  • Rent paid minus 10% of your basic salary.

4. Take Advantage of Section 80E for Education Loans

Interest paid on education loans can be claimed as a deduction under Section 80E. This benefit is available for a maximum of eight years or until the interest is fully paid, whichever is earlier. There is no upper limit on the amount that can be claimed.

5. Utilize Less Known Sections for Additional Savings

Apart from the popular sections, there are other lesser-known sections that can help you save tax:

Section 80G: 

Section 80G of the Income Tax Act provides tax deductions for donations made to certain funds, charitable institutions, and NGOs in India. This section is designed to encourage individuals and corporations to contribute to social causes, offering them tax incentives as a reward for their generosity.

Section 80GG:

Section 80GG of Income Tax Act is specifically designed for those who do not receive home rent allowance from their employers. If a person’s salary includes HRA payment, he/she is ineligible to claim income tax rebates related to housing rent.

Section 80TTA: 

Section 80TTA of the Income Tax Act, 1961 provides a deduction on the interest earned from savings accounts. This deduction is available to individual taxpayers and Hindu Undivided Families (HUFs). 

6.How to Save Tax Beyond 80C for Salaried Employees?

1. Use Section 80G for Donations

Section 80G is a provision under the Income Tax Act of India that allows taxpayers to claim deductions for donations made to specified charitable institutions and funds. The purpose of this section is to encourage individuals and organizations to contribute towards charitable causes while also providing them with tax benefits.

2. Save Tax with Interest Income Exemption

Tax season can be a stressful time for many, but it doesn't have to be. One of the smartest ways to reduce your tax liability is by taking advantage of interest income exemptions. Whether you're earning interest from savings accounts, fixed deposits, or other financial instruments, understanding how to claim these exemptions can lead to significant savings. Interest from savings accounts up to Rs.10,000 is exempt under Section 80TTA. For senior citizens, interest up to Rs.50,000 is exempt under Section 80 TTB.

3. Claim Deductions for Disability Under Section 80U

Navigating the world of taxes can be daunting, especially for individuals with disabilities. Thankfully, the Indian government has provisions like Section 80U of the Income Tax Act to provide some relief. This section allows individuals with disabilities to claim deductions on their taxable income, easing their financial burden. But how exactly does one go about claiming these deductions?

4. Utilize Section 80GG for Rent

Renting a home can be a significant expense, and for those without a House Rent Allowance (HRA) component in their salary, this cost can feel even more burdensome. Thankfully, the Indian government provides relief through Section 80GG of the Income Tax Act. This provision allows individuals to claim a deduction for rent paid, easing the financial strain. 

FAQs

1. What are hidden ways to save tax?

A. Hidden ways to save tax include lesser-known sections like 80GG for rent and 80TTA for savings account interest.

2. How can I save tax if my salary is above 10 lakh?

A. Investing in options under Section 80C, 80D for health insurance, and claiming HRA can help reduce taxable income for higher salary brackets.

3. What are the tax-saving options for salaried employees other than 80C?

A. Sections like 80D, 80E, and 80G provide additional tax-saving options apart from 80C.

4. How can I save tax if my salary is above 20 lakh?

A. High-income earners can benefit from all the mentioned sections, along with investing in the National Pension System (NPS) under Section 80CCD.

5. Are there ways to save tax after claiming the Rs.1.5 lakh limit under 80C?

A. Yes, you can explore deductions under other sections like 80D, 80E, 80G, and 80TTA.



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Author- Ayush Naik 

Ayush Naik is an expert in personal finance with an MBA in Finance. With over five years of experience working alongside stock market traders, Ayush has a deep understanding of market dynamics and investment strategies. His practical insights and analytical skills have helped many individuals navigate the complexities of financial planning and investment. Ayush’s professional background and commitment to educating others make him a valuable contributor to our personal finance blog.