Mastering Income Tax Deductions: Your Ultimate Guide

Every salaried person wants to be financially stable for the present and future. Economically sound means you have enough, or you may say you save more than you spend. If you save properly, you can eventually become financially stable and enjoy life, along with handling your responsibilities efficiently.

“To become financially stable”, it is essential to know that you are paying the right amount of taxable income. To manage your taxable income, you must know about income tax deductions that can help you reduce the amount of taxable income. Here are some of the income tax deductions that will help salaried employees manage their taxes and decrease their taxable income.

Income Tax

1. Standard Deductions: Income tax deductions for salaried employees under standard deductions vary according to the tax slab.

2. Deductions on House Rent Allowance: If you do not get House Rent Allowance being a salaried employee, then you can claim deductions upto 60,000. It comes under 80GG. If you are a salaried employee and receive a House Rent Allowance, then you can also claim income tax deductions on the allowance amount.

3. Charity Contribution Deduction: You are eligible for an income tax deduction under section 80G of the ITA if you have given a donation to relief funds. If you have given donations for rural development and scientific research, then you can claim income tax deductions under section 80GGA.

4. Home Loan Interest Deductions: The 24 section of the Income Tax Section Act allows you to claim deductions on your home loan interest amount upto 2 lakh upper limit.

5. Health Insurance Deductions: If you have invested in health insurance, you are eligible to claim income tax deductions of upto 25,000. Health insurance deductions come under section 80D of the Income Tax Act. If you or your spouse are over the age of 60, your deductions increase from 25,000  to 50,000.

6. Serious Ailment Deductions: If you or someone dependent on you have a severe disease that requires treatment, then you can claim income tax deduction upto rupees 40,000.

7. Educational Loan Deductions: If you take an educational loan for higher education for yourself, your spouse, or your children, then you are eligible for tax exemption and avail income tax deductions for up to 7 years.

8. Tax deductions under section 80C: Save upto 1.5 lakhs of the amount for investments done under section 80C. Some of the investments that can help you decrease your taxable income are:

  1. Sukanya Samruddhi Yojana: You can open the account after the birth of a girl child up to 10 years of age. The interest rate is 8% p.a., and the minimum investment amount is 250 rupees per annum. You have to pay until she is 15 years of age, and you will receive money when she turns 18.
  2. Children’s tuition fee Deductions: You can claim upto 1200 rupees for two children yearly by one salaried person. It means if both the parents are salaried, then they can claim this income tax deduction for 4 children.
  3. Public Provident Fund(PPf) Deductions: You can contribute upto 1.5 Lakhs in PPF per year to receive Income tax benefits.
  4. Employment Provident Fund deductions: As a salaried employee, approximately 12 per cent of your monthly income goes towards your EPF account. You can claim Income tax deduction benefits on your annual contribution of 1.5Lakhs.
  5. Fixed Deposits(FDs): FDs have always been a source of saving and claiming income tax benefits. If you have FDs of an amount less than 40,000 in a bank, then TDS won’t be deducted.
  6. Life Insurance Premium Deductions: You can claim tax deductions on life insurance premium payments of upto 1.5 Lakhs.
  7. National Pension Scheme: A salaried employee can claim tax deductions upto 10% of their salary. The upper limit is 1.5 Lakhs, which comes under section 80CCE.

Understanding income tax deductions helps you chalk out your expenses and savings in the right way. It also makes sure that you think in the direction of the right investment to avail income tax deductions on investments. This not only increases our assets but also gives you future security by saving your taxable income. So, start checking all your options to avail yourself of income tax deductions and step up towards financial stability. If you have any doubts, feel free to get assistance from Canara HSBC Life Insurance. They help you understand and manage income tax deductions in a relaxed way.