Tips to save Tax on your Income in India

In the present scenario every individual is looking to save tax on income in all possible measures. To

save tax on your income there are many ways of doing it and reaping the benefits of savings in two

dimensions. One to add up to your saving and also for future and legally avoid paying unnecessary tax

for which government has made provisions.

Now you can save on your tax through various elements and under the provisions of the Government

for individuals. A person can save tax on income under Section 80C, 80D, 80G and NSC. Please find

below the different ways to save tax on the Income and avoid the confusion.

House Rent Allowance

Every salaried employee gets House Rent Allowance or HRA for the rent you are paying. It is required

to submit receipts for the rent being paid. The house you are staying should not be in the name of any

of your immediate relatives. The HRA or the rent paid which ever is less will be deducted from your

gross salary. For those living in metros the Rent should not be more than 50% of salary and for other

40 % of the salary. If the rent is more than Rs. 5000 then lease document and receipts with revenue

stamp should be submitted.

Different Income Tax Saving Schemes in India

The government has provided a lot of means for the individuals to save the tax from income by

investing or depositing in the various government schemes like:

1. Public Provident Fund (PPF)

Public Provident Fund or generally called as PPF is saving scheme for employees in various

government, public and private sector organizations for Income Tax Saving in India. The government

has set limit for saving ranging from a minimum of Rs. 500 to the maximum of Rs. 70,000. The

government pays a rate of interest at 8%. This can be opened in any public sector banks like SBI and

others. For employees the company deposits in the PPF.

2. National Savings Certificates (NSC)

National Savings Certificates or NSC is yet another saving scheme for Tax Saving on Income in India.

The investment in this scheme starts from a minimum of Rs 100 ar a rate of interest of 8%. A person

investing in this scheme can avail Income Tax benefit under the Income Tax Act, 1961 section 88 for

the amount invested.

3. Post Office Scheme (POS)

This is one of the best and most used scheme in India for Income tax saving in India. A person can

join in this scheme any time in the year and the account can be operated either single or jointly.

4. Kisan Vikas Patra (KVP)

Kisan Vikas Patra or KVP as known is a scheme which is for Income Tax Saving in India where a

person’s investment gets doubled in 8 years earlier it was 5 years. A person can invest a minimum of

Rs 100 and under Income Tax Act, 1961 the person gets tax benefit for the amount invested.

5. Dividend

As per the Income Tax Act 1961 any person can claim income tax benefit from the income earned

from dividends which from the UTI, shares and mutual funds.

Section 80C and Section 80D saves Income Tax

Section 80C Deductions

Under the provision of Section 80C of the Income Tax Act 1961 the department allows certain

investments and expenditure to be tax exempted if these investments and expenditure fall in the

category of Section 80C. The maximum limit is set to Rs. 100,000 and can be claimed from any of the

below mentioned items:

1. Provident Fund or Public Provident Fund contributions

2. Premium payments of Life Insurance Policies

3. Pension Plans investments

4. Investing in the Equity Linked Savings schemes (ELSS) of mutual funds

5. Investment in specified government infrastructure bonds

6. National Savings Certificates (interest of past NSCs is reinvested every year and can be added to

the Section 80C limit)

7. All housing loan payments including registration fee or stamp duty if any.

8. Tuition fees for children towards school or college or university or similar institution. (Only for 2

children)

Section 80D - Medical Insurance Premiums

Medical insurance policies which are well known as Medi claim Policies have been in much usage these

days and investing in these policies provides tax deduction up to Rs 30,000. This is in addition to

Rs.1,00,000 savings. Senior citizens can claim up to Rs. 20,000. This can be claimed on any premium

paid on medical insurance for self, spouse, parents and children.

Income Tax savings through Life Insurance Plan

Life insurance plans provides security and also a confidence that the amount invested will meet in the

time of difficult situations and every individual is encouraged to invest some portion in to these Life

Insurance policies. These investments into these policies also provide Tax savings on Income in India.

Every Life insurance policy gives tax benefits. This also enables you to plan your finances. Always

there are new policies coming into the market and one need to decide what they require. It is a good

option to invest some amount in the traditional plans and some in the Unit linked policies (ULIP’s) and

SIP’s.

Equity Linked Savings Scheme (ELSS) for Income Tax savings

Equity Linked Savings Scheme has become popular these days as it has the potential for higher capital

appreciation. These schemes have a minimum lock in period of 3 years.

Features of Equity Linked Savings Scheme (ELSS)

Maximum investemt – Rs. 1 lakh.

Lock-in period – 3 years.

Liquidity option is curtailed.

It is a risk based investment but returns are maximum even up to 47%.

Unit linked Insurance Plan (ULIP) for Income Tax Saving

Unit linked Saving Schemes or ULIPs are the most preferred way of investing these days. Most of the
Life insurance policies or any other policies are invested through these to gain maximum returns and
also the risk factor is more but seeing the long term of investments people prefer this scheme for
investment and also Income tax savings on the money invested.

Please go through information on filing IT returns at How to file Income Tax in India

How can I save Taxes this year?

Some of the Sections of Income Tax Act, 1961 are detailed below which detail few exemptions
and categories of exempt income that you can take advantage of:
Section 80C: Investment in specified instruments and expenses
Section 80C gives every income tax payer up to a maximum of Rs. 1,00,000 tax free income in a
year if they invest in or buy the following instruments. Please not that this is a combined total of
Rs. 1,00,000 and not an individual figure for every instrument:
1. Premium for Life Insurance or ULIP
2. Provident Fund (PF) contribution
3. Public Provident Fund (PPF) - only up to Rs. 70,000 in a year
4. Repayment of home loan principal
5. Equity Linked Savings Schemes (ELSS) of Mutual Fund Companies
6. Infrastructure Bonds
7. National Savings Certificates (NSC)
8. Tax Saving Fixed Deposits with Banks
9. Tuition Fees of children
Comparison of 80C Investment Avenues
Type of 80C Lock In Returns Risk Taxation of
Instrument Period Returns

Equity Linked Savings 3 years Market Linked High No tax

Scheme (Mutual Fund) (58% Category
Average for yr ending
Dec 28,2007)

Life Insurance 2 years 6% Low No tax

Premium

ULIP Premium 1 3 years Market Linked High No tax

PPF (fixed returns) 15 years 8% Low 2 No tax

Home Loan Repayment 5 years NA NA NA

Infrastructure Bonds 3 years 6% Risk Interest is

(fixed returns) (min) Free taxed

NSC (fixed returns) 6 years 8.16% Risk Interest is

Free taxed

Tax Saving Fixed 5 years 8%-8.75% Risk Interest is

Deposits Free taxed
(fixed returns)

Notes:
1: ULIP premium needs to be at least 1/5th of the sum assured to qualify under Section 80C
2: PPF returns are set by the Government of India and can be revised either upwards or
downwards in any year.
Section 80D: Health Insurance Premium
You can take advantage of an annual deduction of Rs. 15,000 from taxable income for payment
of Health Insurance premium for self and dependants. For senior citizens, this deduction is Rs.
20,000.

Section 80E: Interest paid on educational loans

You can claim a deduction on the interest paid on loans taken for higher education for yourself,
your spouse and children. There is no limit on the amount of deduction you can claim.
The only thing to keep in mind is that the program for which the loan is taken should be a
graduate or post-graduate program in engineering, medicine or management or a post-graduate
course in the pure or applied sciences.
Section 80G: Donations to Charitable institutions
You can claim a deduction for any donation that you might have made to a charitable fund or
institution. However, please note that these donations should be made only to specified
institutions. And a proper proof of payment must be provided for the same. Based on the
classification of the charity , you can claim either 100% or 50% of the donated amount as
deduction. The deduction might also be subject to a certain limit again based on the type of
charity that you are donating money
Section 24: Interest paid on housing loan
Under Section 24, a maximum of Rs 1,50,000 can be deducted from your taxable income as
interest repayment for a self occupied house. Please note that this deduction is not available if
you the house is still under construction and you do not have occupation of the house.
Provisions that you should take advantage of if you are a salaried employee:

Section 10(13A) : House Rent Allowance

You can take advantage of the provisions under this section if you are renting an
accommodation. These provisions will not be available to you if you stay in a rent-free
accommodation or live with your family or in your own house.
Under Section 10(13A), HRA is exempt to the least of the following: i) 50/40 per cent of basic
salary= Dearness Allowance (if, applicable), ii) excess of rent paid over 10 per cent of basic
salary; and iii) actual HRA received.
Lets illustrate this calculation with an example:
Assumptions
HRA per month = Rs 15,000
Basic monthly salary = Rs 30,000
Monthly rent = Rs 14,000
Rental accommodation is in Delhi.
Exemption
The HRA exemption would be the least of the following:
1. Actual amount of HRA: Rs 15,000
2. 50% of salary (basic component + dearness allowance) = 50% x (30,000 + 0) = Rs 15,000
3. Actual rent paid - 10% of salary (basic component + dearness allowance)= Rs 14,000 - [10%
of (30,000 + 0)] = 14,000 – 3,000 = Rs 11,000
Rs 11,000 being the least of the three amounts will be the exemption from HRA.
The balance HRA of Rs 4,000 (15,000-11,000) would be taxable.
Please note that HRA exemptions are only available on submission of rent receipts or the rent
agreement.
Paying Rent to parents or relatives
If you want to pay rent to your parents or any relatives (like uncle/cousin) whom you are staying
with. You will need to treat them as landlords. And request the owner of the house (which will
be one of your parents) to declare it in his/ her personal income tax return. This will prevent any
litigation in the future.
Section 10 (14) Rule 2BB(10) : Transport Allowance
Transport allowance granted for commuting between your residence and place of work is exempt
up to Rs. 800 a month. You can take advantage of this provision to get a tax exemption of Rs
9600 annually by providing your employer with bills or a self declaration.
Section 17(2) : Medical Reimbursement
You can claim exemption up to Rs 15,000 annually on actual expenditure incurred on your
medical treatment or for treatment of any of your dependants. Moreover, there is no restriction of
approved hospitals or clinic for the same. This is exempt only on provision of actual bills.
However, if the amount is paid out as an allowance not a reimbursement then it would be fully
taxable.

How to save Income Tax?

Saving you income tax

Summary

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 As soon as the financial year nears its end, everybody is concerned about the tax payments of
their company, personal etc. These taxes differ from country to country, and the tax rates also
differ from country to country. This article covers the Income Tax in India.
There are many types of taxes which the government imposes upon its citizens. like Service
tax, Value Added Tax, Wealth Tax, Income Tax, Property Tax, etc. Taxes are collected by
the government from everybody to meet the expenses of the government, to improve the
infrastructure of the country & to develop the country.
In some countries they like Saudi Arabia, the income from sales of natural resources like
crude oil is very high so they do not impose any taxes, as a result they have become tax heavens
for many people who evade taxes from other countries and save the money in these countries to
save there tax.
Now coming to meat of article, on how to save your income tax, there are many
deductions available in the Income tax rules using which one can save a huge amount of
money. . Income tax is to be paid by an individual or corporate when there income exceeds
above the taxable limits. The various deductions available are Section 80C for investments,
Section 80D for med claim or medical expenses and Section 80G for donation etc currently the
tax slabs for the current financial year are as follows.
For Males:
Your Total Annual Income in Tax Rate
Rs in %
Up to Rs. 1,50,000/- Nil
Rs. 1,50,001/- to Rs.
10%
3,00,000/-
Rs. 3,00,001/- to Rs.
20%
5,00,000/-
Rs. 5,00,000/- and Above 30%

For Females:
 Your Total Annual Income in Tax Rate
Rs in %
Up to Rs. 1,80,000/- Nil
Rs. 1,80,001/- to Rs.
10%
3,00,000/-
Rs. 3,00,001/- to Rs.
20%
For Senior 5,00,000/-
Citizens: Rs. 5,00,000/- and Above 30%

Your Total Annual Income in Tax Rate

Rs in %
Up to Rs. 2,25,000/- Nil
Rs. 2,25,001/- to Rs.
10%
3,00,000/-
Rs. 3,00,001/- to Rs.
20%
5,00,000/-
Rs. 5,00,000/- and Above 30%

BASIC Examples:
1) Say you are a Adult Male individual (Not Senior Citizen) with yearly income of 3, 00,000/-
then your tax works out to be
300000 – 150000 = 150000 (remaining taxable amount, since there is no tax for 150000).
For the remaining 150000 @ 10 % = 15000 Rs
So 15000 Rupees is your tax amount, since your income falls into the first slab of the table
above.
2) Suppose if you income is around 3, 50,000 /- then your tax would be
350000 – 150000 = 200000 (remaining taxable amount, since there is no tax for 150000).
For the remaining 150000 @ 10 % = 15000 Rs and 50000 @ 20% = 10000 Rs.
So total tax liability is 25000 Rs.
But you can save a large amount from your tax if you can plan wisely.
Below are the various deductions you can avail of :
1. Conveyance Allowance.
This you can show as the amount paid by your employer to you to cover your travelling
expenses to & fro to your office, the maximum allowable for this is Rs 800 per month which
comes to Rs 9600 for the year. You can get tax benefit for this amount and you don’t have to
submit any bills or vouchers for this.
2. House Rent Allowance or HRA.
If you are staying in a rented house or even if you stay in your parents owned house then
you can claim HRA for the same by showing that you pay the rent to your parents. For this you
have to submit the Paid rent receipts at your office.
HRA can reduce your tax liability by a large amount, as the HRA calculation depends on the
amount of the Basic component in your salary slip then deductions available can be a little less
than actual receipts provided. Like last year I provided receipts of 96000 for one year (8000 per
month), I got a total benefit of around 70000.
3. Investments under Section 80C.(Up to 1 Lakh)
If you have invested any money in
Life Insurance Policy’s
Provident Fund
Public Provident Fund
National Savings Certificate
Infrastructure bonds
Fixed Deposits in Banks,
Equity Linked Saving Schemes of mutual funds or
Pension plans
Then you can get the up to 1 lakh or the complete amount paid amount if it’s less
than 1 lakh for deductions .
4. Medical Expenses under Section 80D. (Up to Rs. 15000)
For these deductions you can submit the Medicals bills at your office. Even if you do not
have any medical expenses, then you can get that at any medical shop for a few hundred rupees
as it saves more money in taxes than money paid to get them. Though it’s a bit Black hat
method, if one does not have any medical expenses, Still its one of the good ways to save tax.
5. Donations to Charity organizations under Section 80G.
If you have donated money to any charity organization, political party or any National
funds you have to obtain the receipt for the same and have to look weather its exempted from
income tax. It will be written on the receipt that deductions under 80G are available for this.
Then you can submit it at your office, depending upon the organization you can get full or 50%
of the amount paid as deduction.
Donations to registered political parties are fully exempted.
Now let me give you my example
Suppose I have an income of 3, 50,000 /- per annum
House rent of 8000 Rs per month
Investments in ELSS mutual funds & LIC Policy amounting to Rs 60000
Medical Bills of Rs 15000 &
Donations to Prime Ministers fund for amount of Rs 1000.
Then my tax liability will be calculated on the net income that is.
350000 – Rent( 70000 ) – Investments ( 60000 ) – Medical Bills( 15000) - Conveyance(9600 ) –
Donation (1000) which is equal to == 194400
Now my total tax to be paid is
194400 – 150000 == 44400 @ 10 % == 4440
So the total tax to be paid in the year is Rs 4440.
If you would not include the above deductions then the total tax to be paid would have been
around 25000 Rupees.
That’s how one can save money and use it for other requirements especially in these conditions
of economic recessions and financial mess & fracas all round the world.
There are many more sections available that I will cover in my next part of the article. If
anybody needs any help regarding tax planning then you can mail me at
kumar.3000@[Link]
Submissions for this collection

How to save Income Tax?

70
rate or flag this pageTweet this

BY NADARVIJAYALAXMI

As soon as the financial year nears its end, everybody is concerned about the tax payments of their
company, personal etc. These taxes differ from country to country, and the tax rates also differ from
country to country. This hub covers the Income Tax in India.

There are many types of taxes which the government imposes upon its citizens. like Service
tax, Value Added Tax, Wealth Tax, Income Tax, Property Tax, etc. Taxes are collected
by the government from everybody to meet the expenses of the government, to improve the
infrastructure of the country & to develop the country.
In some countries they like Saudi Arabia, the income from sales of natural resources like
crude oil is very high so they do not impose any taxes, as a result they have become tax heavens for
many people who evade taxes from other countries and save the money in these countries to save
there tax.

Now coming to meat of hub, on how to save your income tax, there are many deductions
available in the Income tax rules using which one can save a huge amount of money. . Income tax is
to be paid by an individual or corporate when there income exceeds above the taxable limits. The
various deductions available are Section 80C for investments, Section 80D for med claim or medical
expenses and Section 80G for donation etc currently the tax slabs for the current financial year are
as follows.
Income Tax Slabs

BASIC Examples:
1) Say you are a Adult Male individual (Not Senior Citizen) with yearly income of 3, 00,000/- then
your tax works out to be

300000 – 150000 = 150000 (remaining taxable amount, since there is no tax for 150000).

For the remaining 150000 @ 10 % = 15000 Rs

So 15000 Rupees is your tax amount, since your income falls into the first slab of the table above.
2) Suppose if you income is around 3, 50,000 /- then your tax would be
350000 – 150000 = 200000 (remaining taxable amount, since there is no tax for 150000).

For the remaining 150000 @ 10 % = 15000 Rs and 50000 @ 20% = 10000 Rs.

So total tax liability is 25000 Rs.

But you can save a large amount from your tax if you can plan wisely.

Below are the various deductions you can avail of :

Below are the various deductions you can avail of :
• Conveyance Allowance.
This you can show as the amount paid by your employer to you to cover your travelling
expenses to & fro to your office, the maximum allowable for this is Rs 800 per month which comes to
Rs 9600 for the year.
You can get tax benefit for this amount and you don’t have to submit any bills or vouchers for this.

• House Rent Allowance or HRA.

If you are staying in a rented house or even if you stay in your parents owned house then
you can claim HRA for the same by showing that you pay the rent to your parents. For this you have
to submit the Paid rent receipts at your office. HRA can reduce your tax liability by a large
amount, as the HRA calculation depends on the amount of the Basic component in your salary slip
then deductions available can be a little less than actual receipts provided. Like last year I provided
receipts of 96000 for one year (8000 per month), I got a total benefit of around 70000.

• Investments under Section 80C.(Up to 1 Lakh)

If you have invested any money in

Life Insurance Policy’s

Provident Fund

Public Provident Fund

National Savings Certificate

Infrastructure bonds

Fixed Deposits in Banks,

Equity Linked Saving Schemes of mutual funds or

Pension plans

Then you can get the up to 1 lakh or the complete amount paid amount if it’s less than 1 lakh
for deductions .
 • Medical Expenses under Section 80D. (Up to Rs. 15000)
For these deductions you can submit the Medicals bills at your office. Even if you do not have any
medical expenses, then you can get that at any medical shop for a few hundred rupees as it saves
more money in taxes than money paid to get them. Though it’s a bit Black hat method, if one does
not have any medical expenses, Still its one of the good ways to save tax.

• Donations to Charity organizations under Section 80G.

If you have donated money to any charity organization, political party or any National funds you have
to obtain the receipt for the same and have to look weather its exempted from income tax. It will be
written on the receipt that deductions under 80G are available for this. Then you can submit it at your
office, depending upon the organization you can get full or 50% of the amount paid as
deduction. Donations to registered political parties are fully exempted.
Now let me give you my example
Suppose I have an income of 3, 50,000 /- per annum

House rent of 8000 Rs per month

Investments in ELSS mutual funds & LIC Policy amounting to Rs 60000

Medical Bills of Rs 15000 &

Donations to Prime Ministers fund for amount of Rs 1000.

Then my tax liability will be calculated on the net income that is.

350000 – Rent( 70000 ) – Investments ( 60000 ) – Medical Bills( 15000) - Conveyance(9600 ) –

Donation (1000) which is equal to == 194400

Now my total tax to be paid is

194400 – 150000 == 44400 @ 10 % == 4440

So the total tax to be paid in the year is Rs 4440.

If you would not include the above deductions then the total tax to be paid would
have been around 25000 Rupees.
That’s how one can save money and use it for other requirements especially in these conditions of
economic recessions and financial mess & fracas all round the world.
There are many more sections available that I will cover in my next part of the
article. If anybody needs any help regarding tax planning then you can mail me at
kumar.3000@[Link]
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