Tax Saving Tips for Salaried Employees in India
Being Tax Advisor, it’s our responsibility to guide Individual Assesses (specifically the salaried one) an effective tax-saving strategies. Here are some tips to help salaried employees in India maximize their tax savings:
1. Utilize Section 80C
Under Section 80C of the Income Tax Act, individuals can claim a deduction of up to ₹1.5 lakh for investments in specified instruments such as:
- Public Provident Fund (PPF)
- National Savings Certificates (NSC)
- Tax-saving Fixed Deposits
- Life Insurance Premiums
- Specified Mutual Funds/Equity-Linked Savings Schemes (ELSS)
- Home Loan Principal Repayment
2. Employer’s Contribution to NPS
Section 80CCD(2) allows for an additional deduction of up to ₹50,000 for contributions made by the employer to the National Pension System (NPS). This is over and above the ₹1.5 lakh limit under Section 80C.
3. Health Insurance Premiums
Under Section 80D, individuals can claim deductions for health insurance premiums paid for themselves, their spouse, children, and parents. The deduction limit is ₹25,000 for self and ₹25,000 for parents, totaling ₹50,000.
4. Standard Deduction
From FY 2024-25, the standard deduction has been increased to ₹75,000 under Section 16(ii). This deduction is available to all salaried employees and is deducted from the gross salary.
5. House Rent Allowance (HRA)
If you live in a rented house, you can claim HRA exemption under Section 10(13A). The exemption is calculated as the minimum of:
- Actual HRA received
- 50% of (Basic Salary + DA) for those living in metro cities, or 40% for non-metro cities
- Rent paid minus 10% of (Basic Salary + DA)
6. Leave Travel Allowance (LTA)
Under Section 10(5), you can claim LTA for travel expenses incurred for yourself and your family. This exemption is available twice in a block of four calendar years.
7. Deduction for Interest on Home Loan
Under Section 24(b), you can claim a deduction for interest paid on a home loan up to ₹2 lakh per financial year.
8. Donations
Donations made to specified charitable institutions qualify for deduction under Section 80G. The deduction can be either 50% or 100% of the amount donated, depending on the institution.
9. Education Loan Interest
Under Section 80E, interest paid on an education loan for higher studies is deductible. There is no upper limit on the amount of interest that can be claimed.
10. Tax-saving Investments
Consider investing in tax-saving mutual funds (ELSS) and other instruments that offer tax benefits under Section 80C.Where Individuals can get the deduction for the specified investments in Mutual fund subject to limit of Rs. 1,50,000 under Section 80C.
