How to reduce Income Tax Liability in India? Methods to save Tax in India || Best Investment Ideas to save Tax

In India, we have to pay Income Tax if income increase the certain limit prescribed by the Government of India. You can check those Criteria and Slabs Here

From the Financial Year 2019-20, Income Tax Department of India has introduced 2 Regimes of Tax Calculation as "Old Tax Regime" and "New Tax Regime" where the Taxpayer can choose any of the regime where he/she can save the maximum tax and can file the return

New Tax Regime comes with many restrictions of Deductions. If you want to save Tax then New Tax Regime will be not beneficial for you because it restricts all the deductions such as 80C, 80D, 80TTA etc.

New Tax Regime is only helpful for those who don't want to invest or they are not able to claim any of the following deductions mentioned below (points 1 to 10 as mentioned below)

Now comes to Old Tax Regime, Every year people with huge income search for the best options to Save maximum Tax so that they don't need to pay excess tax to the government. They Invest their amounts in many places so that the liability of Tax be reduced by maximum level

So, today we are here to introduce you the 10 best Investment/deduction methods through which you can save more than 2,00,000 of your Tax as per the Old Tax Regime

So, to save the Tax, following are some of the methods of investments through which you can save your Tax Payable amount a lot:

(1) (Deduction u/s 80C): A Taxpayer can claim Maximum Limit of Deduction Rs. 1,50,000 + 50,000 Extra Deduction of NPS = Total will be 2,00,000 u/s 80C

Deduction u/s 80C Includes the following: 

> Life Insurance Premium,

> Sukanya Samriddhi Yojana,

> ELSS Schemes (Equity Linked Saving Scheme),

> 5 Year’s Fixed Deposit,

> PF Deposits,

> PPF Deposits,

> Selected Mutual Fund SIP’s, 

> NSC,

> Principle paid on House Loan Payment,

> Tuition Fee paid for Children,

> National Pension Scheme (Extra 50,000 Deduction apart from 1,50,000)

> Investment in Infrastructure Bonds etc.

(2) Deduction u/s 80D & Section 80U: Payments made for Health Insurance Premium gives you the Deduction under section 80D. Extra Deductions for Severe Illness and Disease, Parent’s Mediclaim Premium and Expenses includes in 80D from where the deduction can be claimed

Example (for person below age 60 years):

> Mediclaim Premium (Self): 25,000

> Mediclaim Premium for Dependent Parents: 25,000

> Person with Disability: 75,000

> Person with Severe Disability: 1,25,000

> Preventive Health Checkups: 5,000

> Selected Illness & Disease: If a person is suffering from the following disabilities, then he/she can claim extra deduction of 40,000.

(A) Neurological Diseases where the disability level has been certified to be of 40% and above

(a) Dementia
(b) Dystonia Musculorum Deformans
(c) Motor Neuron Disease
(d) Ataxia
(e) Chorea
(f) Hemiballismus
(g) Aphasia
(h) Parkinsons Disease

(B) Malignant Cancers

(C) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS)

(D) Chronic Renal failure

(E) Hematological disorders

(a) Hemophilia
(b) Hemophilia
(c) Thalassemia

Note: To claim the deduction from the Special Diseases, you need to get a Certificate from the Doctors of related fields

To Know more about deduction under medical insurances: Click Here 

(3) Donation Paid (80G): Donation Paid to Private Trusts:  The Half of the donation amount will be allowed as deduction

Donations paid to Government Funds such as Temple, Political Parties etc. allowed 100% deduction of amount paid as donation

To claim the deduction u/s 80G, you need the Payment Slips of Donation, with Proper PAN card mentioned of Trust on donation paid slip, Address, Donation Amount, Payment methods (Through Cash, Cheque, Demand Draft, E-Mode etc.)

(4) Principle Paid on House Loan: Principle Payment to House Loan Payment is allowed maximum deduction of 1,50,000 u/s 80C

(5) Interest Paid on House Loan (Section 24): Interest Paid on Own House Loan is allowed as deduction u/s 24 with the maximum limit of 2,00,000. If the loan is in the name of 2 Persons then both can take deduction of 2-2 lakhs (if the interest paid amount is more than 4 lakhs). Otherwise, both can divide the Interest to claim the available interest in Tax Computation

(6) Interest Paid on Higher Education Loan (80E): Education Loan received from Bank OR Banking Financial Corporations and Interest paid on that will be allowed as deduction u/s 80E. You can claim the deduction for 8 Years and there is no Maximum Limit for this

(7) House Rent Payment: If you are receiving HRA from Company, then Rent Paid by the employee will be allowed as deduction while Income Tax Calculation.

The Calculation to find the taxability amount of HRA is as follows:

(i) 50% (If the person who paid the rent lives in following cities: Delhi, Mumbai, Chennai, Kolkata) or 40% of the Basic Salary (Basic + Dearness Allowance + Incentive)

(ii) Actual HRA Received from the Company

(iii) Actual Rent Paid (Less) 10% of the Basic Salary

The minimum amount received from the above calculation will be exempted and remaining HRA will be taxable

(8) Leave Travel Allowance: If you are receiving Leave Travel Allowance from Company, then Expenses on Domestic Travelling (Paid by the employee for himself & his family) will be allowed as deduction while Income Tax Calculation (Maximum 2 Trips in 4 years)

Maximum Limit of Deduction is: The actual amount received as Leave Travel Allowance from the Company

(9) Expenses Incurred on behalf of the Company: If you are Receiving allowances like Entertainment Allowance, Books & Periodicals etc. from the company then Expenses Incurred by you for purchase of above mentioned expenses will be allowed as deduction in Income Tax Calculation

In Companies Terms, we call this as Flexi Benefits

(10) Standard Deduction of 50,000: If you are Salaried Person, then you are eligible 50,000 of standard deduction without any payments to any place. This Deduction is standard for everyone and all can claim without doing any external Expenses or Investments

You can Calculate your Tax by both of the regimes by following Tax Calculator: Click Here

If you are looking for the Best Investment Opportunities, Places and Ideas in 2021, Here is the Top 10 best Investment Ideas for you: Click Here 

(Investment Option at the Number 3 is damn good !)

These investments will save your lots of Tax and also gives you Good amount of Returns.

Hope the above mentioned methods helps you to save your Tax. Do share the article with your all friends so that they can also save tax

Thanks & Regards

Team: Online Knowledge Zone