The last date to file Income tax for the financial year 2019-20 is fast approaching and individuals are again scrambling to find ways to reduce their income tax outgo. Filing income tax has become much easier now and tax filers can select from two different tax regimes.While the new regime is pretty straightforward and somewhat beneficial for people with no investments, experts recommend the older regime for people who have sizeable investments.Individuals filing income tax under the old regime have a host of legal ways to save tax under the Income Tax Act, 1961. Having said that, here are a few simple ways which will allow you to reduce tax outgo:
Deductions under Section 80C
This is one of the most common deductions allowed under income tax rules. Individuals can claim a deduction of Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961. Simply put, if you can show annual investments worth Rs 1.5 lakh, you can reduce the amount from your total taxable income. It is available for both individuals and HUFs.
Additional 50,000 deduction under Section 80CCD (1B)
Besides Rs 1.5 lakh under Section 80C, you can also claim an additional Rs 50,000 deduction under Section 80CCD (1B) for contributions to the National Pension Scheme (NPS). It may be noted that the NPS allows individuals to invest in equity and debt pension funds, helping them build a retirement corpus. The entire amount can be withdrawn at the age of 60.
Claim deduction for education loan under Section 80(E)
Under this section, individuals can claim a deduction against interest on loans taken for pursuing higher education. The loan can be taken by either the taxpaying individual, his/her children or spouse. It may be noted that the deduction under Section 80(E) is available for up to 8 years or till the entire interest is repaid, whichever is earlier. Also, there is no upper ceiling on the amount that can be claimed.
Medical insurance premium deduction under Section 80(D)
An individual or HUF can claim a deduction of Rs 25,000 against payment of medical insurance premium in a year. The deduction can be claimed on medical insurance premium paid for self, spouse, children and parents. It is worth noting that an additional deduction for insurance of parents is available up to Rs 25,000, provided they are not senior citizens (above the age of 60).
In case the parents are aged above 60 years, the deduction amount further increases to Rs 50,000. In a situation where both the taxpayer and parents are above the age of 60, the maximum deduction that can be availed is Rs 1,00,000. Deduction on home loan interest
In case of an ongoing home loan, you can claim the interest payable as tax deduction under Section 24 of the Income Tax Act. The amount that can be claimed is up to Rs 2 lakh per annum. Furthermore, you can claim an additional deduction of Rs 50,000 above the Rs 2,00,000 under Section 80(EE) of the I-T Act.
Deduction against interest on savings account
An individual or a HUF can also claim a maximum deduction of Rs 10,000 against interest income from savings account with a bank, co-operative society or post office. Simply put, interest on savings accounts is tax-free up to Rs 10,000 per annum under Section 80TTA of the I-T Act.
Deduction against donations
Another simple way to increase tax deduction is through charity or donations. Various donations specified under Section 80(G) of the Income Tax Act are eligible for either 100 per cent or 50 per cent deduction. However, individuals should note that cash donations above Rs 2,000 will not qualify for tax deductions. Therefore, it is ideal to make donations via digital forms as they will be eligible for tax deduction under Section 80(G).