If you work in a salaried job in India saving on taxes should be an important part of your financial planning. Taxes are a part of life but there are many legal ways you can reduce how much you pay so you can save more and invest better.
This article will show you some simple and easy tax-saving options available to salaried people under the Indian Income Tax Act. These are proven methods that millions of people in India use and with a little planning you can use them too.
1. Choose the Right Tax Regime – Old or New
Every year, salaried employees have to choose between two tax regimes:
- Old Regime: This allows you to claim deductions and exemptions.
- New Regime: This has lower tax rates but no deductions.
If you:
- Invest in PPF, ELSS, NPS, or LIC
- Pay rent and claim HRA
- Have a home loan and insurance
Then, the Old Regime might be better for you. You can compare both regimes using an online tax calculator to see which one saves you more.
2. Invest Under Section 80C – Save ₹1.5 Lakh
Section 80C is one of the best ways to save taxes. You can claim deductions up to ₹1.5 lakh in a year. Here’s where you can invest:
- EPF (Employee Provident Fund): This is automatically deducted from your salary.
- PPF (Public Provident Fund): A safe long-term investment backed by the government.
- ELSS (Equity Linked Savings Scheme): A mutual fund with tax benefits and returns linked to the stock market.
- NSC (National Saving Certificate) and 5-Year Bank FDs: These are safe but offer fixed returns.
- Life Insurance Premiums: For policies in your or your family’s name.
- Children’s Tuition Fees: You can claim for up to two kids.
3. Extra Deduction With NPS – Section 80CCD(1B)
In addition to Section 80C you can claim an extra ₹50,000 deduction if you invest in the National Pension Scheme (NPS). This is useful if you’ve already used up your ₹1.5 lakh limit under Section 80C but still want to lower your taxable income. NPS also helps you build your retirement savings slowly.
For example if you invest ₹4,000 every month in NPS you can claim ₹48,000 in deductions annually. Plus you’re saving for your future
4. Claim HRA If You Live on Rent
Many salaried employees receive House Rent Allowance (HRA) as part of their salary. If you live in a rented house you can claim an HRA exemption. Here’s how the exemption is calculated:
- Actual HRA received
- Rent paid minus 10% of your basic salary
- 50% of your basic salary if you live in a metro city, or 40% if you live in a non-metro city
Whichever of these three numbers is the lowest will be your HRA exemption. To claim this, you’ll need to submit rent receipts and the PAN details of your landlord (if the annual rent exceeds ₹1 lakh).
5. Save on Home Loan Interest – Section 24(b)
If you have a home loan you can claim a deduction for the interest you pay under Section 24(b). This is separate from the principal amount which you claim under Section 80C.
If you’re a first-time homebuyer and your property value is within a certain limit, you can also claim an extra ₹50,000 under Section 80EE.
6. Deduct Medical Insurance Premium – Section 80D
Buying health insurance can protect your family from high medical costs, and it also saves you tax:
- ₹25,000 for your own or your family’s policy
7. Education Loan? Claim Under Section 80E
If you’re repaying an education loan for yourself your spouse or your child you can claim the entire interest paid under Section 80E. There is no limit to how much interest you can claim, and you can continue to claim it for up to 8 years from the year you start repaying.
Make sure the loan is from a recognized financial institution not from a friend or relative.
8. Donations Save Tax Too – Section 80G
If you donate to charity you can claim tax deductions under Section 80G. Here’s how:
- Donate through a bank transfer (not in cash if it’s over ₹2,000)
- Keep the receipt with the PAN of the charity
- Ensure the charity is registered with the Income Tax department
Conclusion
Taxes might seem like a burden but with the right planning they can help you save more money and build your wealth. Use sections like 80C, 80D, 24(b), and others to reduce your taxes and invest in your future.
Whether you’re new to your career or you’ve been working for years these tax-saving tips can help you manage your finances and pay only what you owe – nothing more.
I am a digital marketing executive as well as content writer in the income tax and credit cards category. My goal is to provide simple, interesting and reliable information to readers through my articles so that they always stay updated with the world of income tax and credit cards.
