One of the important questions asked on my YouTube Channel is How to Save Income Tax in India when salary is above Rs. 7 Lakh in a year. We will see 6 tips to save income tax in India for FY 2023-24 in this post.
6 popular ways to save income tax in India with limits:
- Standard Deduction – Rs. 50,000
- Section 80C – Rs. 1,50,000
- Section 80D – Rs. 50,000
- Section 80CCD(1B) – Rs. 50,000
- HRA (House Rent Allowance) – Limit based on calculations
- Section 24 – Rs. 2,00,000
It is important to note that above options are allowed only in Old Tax Regime. In new tax regime, only standard deduction will be allowed from FY 2023-24.
How to Save Income Tax Video
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Let us now see details of all sections below.
1. Standard Deduction
Standard Deduction is a flat deduction of Rs. 50,000 that was introduced in Budget 2019 in Old Tax Regime. In Budget 2023, that will be applicable from FY 2023-24, Standard Deduction will be also available in New Tax Regime as well.
So if you are salaried employee or pensioner, you will get standard deduction of Rs. 50,000 in both Old and New Tax Regimes from FY 2023-24 onwards.
If you are selecting, new tax regime in FY 2023-24, you get Rs. 52,500 tax benefit due to this standard deduction if your income is above Rs. 15.5 Lakh in FY.
It is important to note that you must reduce this standard deduction of Rs. 50,000 from your gross income as the first step towards calculating your income tax.
Use this Income Tax Calculator to check your income tax based on income and investments and choose between Old or New Tax Regime.
ALSO READ: Income Tax Calculation FY 2023-24 Excel Download
2. Section 80C
Another important and popular section to save income tax is Section 80C.
Section 80C has multiple options where you can save income tax based on your investments and expenses and the limit is Rs. 1,50,000 in FY. Some of them are listed below:
- EPF (Employee Provident Fund)
- PPF (Public Provident Fund)
- Life Insurance Premiums
- 5 Year Fixed Deposits
- ELSS Mutual Funds (Equity Linked Saving Scheme)
- Home Loan Principal Amount Repayment
You can select multiple options under Section 80C and invest up to Rs. 1,50,000 to claim deductions and save income tax or you can even invest in one option and claim the entire maximum limit.
Once you invest the required amount, either the invested amount or Rs. 1,50,000 (whichever is lower) need to be reduced from gross income to reach taxable income on which income tax will be calculated.
ALSO READ: Full list of Section 80C Deductions
3. Section 80D
Section 80D belongs to Medical insurance premiums that you pay.
In today’s world with several number of diseases, it is important to have medical insurance to save yourself from spending your hard earned money into curing a critical disease.
The aim of taking medical insurance is to get the hospital expenses from the insurance company when someone in your family (or you) is going through a critical disease and needs attention in hospital.
In such case, if you have medical insurance the the patient is insured, the hospital expenses are handled by insurance company.
Section 80D limits depend on your (and insured) age. Below are the details about Section 80D limits:
| Person Age | Limit |
|---|---|
| Age up to 60 Years | Rs. 25,000 |
| Age above 60 Years (Senior Citizens) | Rs. 50,000 |
So if your age is below 60 years, you get maximum deduction of Rs. 25,000 under Section 80D, where as if you are senior citizen and age is above 60 years, the limit is Rs. 50,000 in a financial year.
Now important point is you can take medical insurance for self, including spouse and children and for parents as well.
If your age is below 60 years, you can claim Rs. 25,000 in Section 80D, and if parents are also below 60 years than another Rs, 25,000 so total of Rs. 50,000 can be claimed. But if parents are senior citizens, the total claim can reach up to Rs. 75,000 since your parents belong to senior citizen category.
Section 80D Maximum Limits
Below are the details of maximum limits that can be claimed under Section 80D:
| Description | Section 80D Maximum Limits |
|---|---|
| Self and Parents below 60 Years | Rs. 50,000 – (Rs. 25,000 + Rs. 25,000) |
| Self below 60 years and Parents above 60 Years | Rs. 75,000 – (Rs. 25,000 + Rs. 50,000) |
| Self above 60 years and Parents above 60 Years | Rs. 1,00,000 – (Rs. 50,000 + Rs. 50,000). |
So as seen above, if self and parents both are senior citizens, maximum of Rs. 1,00,000 can be claimed to save income tax.
ALSO READ: All Deduction options Allowed to Save Income Tax
4. Section 80CCD(1B)
Section 80CCD(1B) includes NPS (National Pension System) that allows you to claim Rs. 50,000 in a FY to save income tax.
This is the limit over and above Rs. 1,50,000 in Section 80C. NPS allows you to invest in market and get good returns and plan for retirement.
There are 2 categories under NPS – Tier 1 and Tier 2.
Tier 1 allows you to save tax where as Tier 2 is similar to your savings account. In Tier 1 you cannot withdraw until your age is 60 years where as in Tier 2 you can withdraw your money but without any tax benefits.
Below is the video on how to invest in NPS:
How to Invest in NPS Video
ALSO READ: How to Open NPS Account Online
5. HRA (House Rent Allowance)
If you are salaried employee, you must have noticed HRA (House rent allowance) component in your payslip. Below is the example:
This HRA component is taxable by default, which means you need to pay income tax on HRA.
But if you stay on Rent and pay rent for the accommodation, you can declare that you stay on rent and claim this HRA amount to save income tax.
There are certain HRA calculations you need to do to reach the amount you can claim in HRA.
Below are the calculations on HRA limit to be claimed:
- Actual HRA received
- Rent minus 10% Basic Salary + DA
- 40% of Basic Salary + DA (non metro city) or 50% of Basic Salary + DA (metro city)
The minimum of above 3 calculations will be considered to be claimed as HRA amount. And this HRA amount can be reduced from your gross income to save income tax.
You can also use this HRA calculator to check your HRA amount to be claimed.
ALSO READ: HRA Exemption Calculations with Examples
6. Section 24
Section 24 includes the home loan interest amount that you pay back in the form of home loan EMI, for which the limit is Rs. 2,00,000 in a financial year.
So if you have home loan and pay interest in the form of EMI, you can claim the interest portion under Section 24 and the limit is Rs. 2,00,000.
Also, the principal portion of home loan can be claimed under Section 80C for which the limit is Rs. 1,50,000 which we have already discussed above.
You can easily know how much interest amount you are paying in your home loan by using the Home Loan Excel Calculator.
No Income Tax on Income up to Rs. 11 Lakh
So far we have seen all the popular investment options that can help us save income tax. Can we use them to pay no income tax even when the income is up to Rs. 11 Lakh in financial year?
Yes we need not have to pay any tax when income is Rs. 11 Lakh. Below are the total deductions we can use:
So when we claim Rs. 6,00,000 as deduction under various sections as seen above, and if income is Rs. 11 Lakh, our taxable income becomes Rs. 5 Lakh (Rs. 11 Lakh – Rs. 6 Lakh).
And based on Tax Rebate under Section 87A and Old Tax Regime, we don’t pay any income tax if taxable income is Rs. 5 Lakh or below.
It is important that we use Old Tax Regime to claim these deductions, since new tax regime does not allow us to claim deductions apart from standard deduction of Rs. 50,000.
Conclusion
So we can easily save income tax using the options mentioned above.
Even when our income is up to Rs. 11 Lakh, we can claim up to Rs. 6 Lakh as deductions to get taxable income to Rs. 5 Lakh and based on old tax regime and tax rebate under section 87A, our income tax will be zero.
Please note that no deductions are allowed on these investment in new tax regime, except standard deduction of Rs. 50,000 applicable from FY 2023-24.
Which tax saving option do you use to save income tax? Comment below.
Some more Reading
- Old vs New Tax Regime Calculator in Excel
- Senior Citizen Income Tax Calculation
- Rs. 2000 SIP vs Step up SIP Returns
- Best Mutual Funds to Invest
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Income Tax Calculator App – FinCalC
For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.
What you can do with this mobile App?
- Calculate Income Tax for new FY 2024-25 and previous FY 2023-24
- Enter estimated Investments to check income tax with Old and New Tax Regime
- Save income tax details and track regularly
- Know how much to invest more to save income tax
- More calculators including PPF, SIP returns, Savings account interest and lot more
Use Popular Calculators:
- Income Tax Calculator
- Home Loan EMI Calculator
- SIP Calculator
- PPF Calculator
- HRA Calculator
- Step up SIP Calculator
- Savings Account Interest Calculator
- Lump sum Calculator
- FD Calculator
- RD Calculator
- Car Loan EMI Calculator
- Bike Loan EMI Calculator
- Sukanya Samriddhi Calculator
- Provident Fund Calculator
- Senior Citizen Savings Calculator
- NSC Calculator
- Monthly Income Scheme Calculator
- Mahila Samman Savings Calculator
- Systematic Withdrawal Calculator
- CAGR Calculator
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