4 income tax deductions which can save tax upto Rs 1,32,600: Have you availed?

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Updated: March 29, 2019 6:27:10 PM

The three tax slabs are 5%, 20% and 30% while the effective tax rates after including the cess become 5.2%, 20.8% and 31.2%.

Tax Saving,Section 80C, Section 24, tax saving investment,maximum tax savingThe income tax rules allows one to lower his or her tax liability by availing certain deductions.

Tax planning involves not only investing in any of the tax saving investment but also to link them to one’s long term goals. While the benefit of saving taxes is immediate, the long term nature of tax savers helps in creating or preserving wealth for the tax payers.

The income tax rules allows one to lower his or her tax liability by availing certain deductions such as Section 80C, Section 24 etc. from one’s income. The amount of tax saved by availing any such deduction depends on one’s individual tax slab. The maximum tax saving depends upon two things – Individual’s tax slab and the upper limit of the Deduction.

The three tax slabs are 5%, 20% and 30% while the tax rates after including the cess become 5.2%, 20.8% and 31.2%. So, if a taxpayer in the 20 per cent avails a deduction of Rs 1 lakh, the total tax saving will be Rs 20,800.

Now, let us see how much maximum tax saving one may take advantage of by availing few common deductions such as Section 80C, 80CCD (1B), Section 80D and Section 24. these four sections largely caters to someone saving for long term goals, has a medical insurance policy and is paying EMI on a home loan.

1. Section 80C – The maximum investment limit is Rs 1.5 lakh per financial year in any of the specified investments such as PPF, NPS, NSC, ELSS etc. The deduction limit also includes certain expense and cash outflows such as money spent on child tuition fees and home loan repayment, respectively.

On a maximum investment of Rs 1.5 lakh, the maximum savings in tax for someone paying 5.2%, 20.8% and 31.2% will be Rs 7,800, Rs 31,200 and Rs 46,800 respectively.

2. Section 80CCD (1B) – The benefit under Section 80CCD (1B)is over and above Section 80CCD(1) and is capped at Rs 50,000. Investment in NPS under Section 80CCD(1) falls withing the umbrella Section 80CCE and has a cap of Rs 1.5 lakh. So, someone who has not taken advantage under Section 80CCD(1) may still avail tax benefit under Section 80CCD (1B).

On a maximum investment of Rs 50,000, the maximum savings in tax for someone paying 5.2%, 20.8% and 31.2% will be Rs 2600, Rs 10400 and Rs 15600 respectively.

3. Section 80D – The premium paid towards health insurance policies such as Mediclaim, Family Floater, Critical illness plans qualifies for deduction under Section 80D of the Income Tax Act. On the premium towards self, spouse, children and parents, the maximum deduction that can be availed is capped at Rs 25,000 a year, provided the age of the individual is not above 60, else it is Rs 50,000.

On a maximum investment of Rs 25,000 ( Premium for no-senior citizen considered) the maximum savings in tax for someone paying 5.2%, 20.8% and 31.2% will be Rs 1300, Rs 5200 and Rs 7800 respectively.

4. Section 24 – The interest paid through EMIs in a home loan qualifies for deduction under Section 24 up to Rs 2 lakh a year provided the property is self-occupied.

On a maximum investment of Rs 1.5 lakh, the maximum savings in tax for someone paying 5.2%, 20.8% and 31.2% will be Rs 10400, Rs 41600 and Rs 62400 respectively.

Taking together, the maximum that can be saved under these four common deductions for someone paying 5.2%, 20.8% and 31.2% will be Rs 22100, Rs 88400 and Rs 132600. respectively. One may even save a higher amount of tax if eligible under section 80D.

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