Considering saving taxes for FY2019-20 under the previous regime? You must already know that the new regime, which is optional, does away with most deductions while enabling higher tax breaks at the same time. Yet, comparatively, if you feel that the old regime will reap you the highest rewards, then you can choose to continue with the same.
The end of the financial year is usually the time when most taxpayers are in a rush to examine their investments with an intention towards scaling up the same as much as possible in order to save taxes. There are several investment options provided under the Indian tax law which can lower the overall liabilities of taxpayers.
Vital deductions for tax saving purposes
There are some investment channels which can be considered as good ways to maximize decent returns, get insurance coverage and also save taxes at the same time. ULIPs or Unit Linked Insurance Plans are one such option along with ELSS (Equity Linked Saving Schemes), post office or term deposits, contributions towards Provident Fund (PF), NSC (National Savings Certificates), SSY (Sukanya Samriddhi Yojana), PPF (Public Provident Fund), Life insurance premiums and annuity plans among other options.
Along with the above mentioned investments, specific expenditure such as repayment of principal amount of home loans and tuition fees are also exempted as deductions under Section 80C of the Income Tax Act. The deduction for investments or expenses across the above channels, covering Sections 80C, 80CCD (1) and 80CCC are limited to a maximum of Rs. 1,50,000. Along with this deduction, in case cash flows are sufficient enough for the taxpayer, he/she can invest an additional amount up to Rs. 50,000 for NPS (National Pension Scheme) and claim deductions under Section 80CCD (1B) of the Income Tax Act. Thus, the maximum possible deduction here can go up to Rs. 2,00,000.
Other ways to save taxes and things you should know
Those repaying home loans can claim deductions for the interest component of the home loan up to a maximum amount of Rs. 2 lakh under Section 24. The maximum deduction aside, if a property has been let out, then there is no upper limit for claiming deductions on interest repayment. However, the overall loss that any taxpayer can claim under the House Property head is limited to Rs. 2 lakh. If there are joint home loan borrowers, both can claim deductions up to Rs. 1,50,000 and Rs. 2,00,000 on principal and interest repayments for a home that is self-occupied. Health insurance is a vital investment that everyone should opt for. Individual tax payers can claim deductions up to Rs. 25,000 under Section 80D for their insurance premiums that have been paid along with premiums paid for dependent children and their spouses.
Added deductions for insurance premiums paid for parents can be claimed up to Rs. 25,000 if the parents are less than 60 years old. In case they are more than 60 years of age, the maximum deduction that can be claimed is Rs. 50,000. If both the tax payer and his/her parents are above the age of 60, the maximum deduction that can be claimed is Rs. 1,00,000. Salaried professionals can also claim deductions for allowances like HRA (house rent allowance) and LTA (leave travel allowance) subject to prescribed regulations being fulfilled.
Now that you know the deductions that you can avail in order to save on taxes, it is prudent that you create your own financial blueprint without further ado. Plan out the investments well in advance so that you do not end up paying excessive taxes while filing your IT returns.