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How To Save Income Tax For FY 2019-20?

Indian Income Tax Act allows for certain exemptions and deductions which can be claimed to save tax for the financial year 2019-20 (Assessment Year: 2020-2021). Proper financial planning is required while keeping in mind the liquidity, safety and returns of tax saving instruments. It is highly recommended that one should have clear cut objectives as to how they can save taxes and which category under Income Tax Act they belong to.

If you want to save yourself from financial stress and save taxes, the following investment opportunities may help you in terms of tax saving. The taxpayers are categorized in income tax slab based on an annual income of an individual.

Save Tax Through Investments

  1. 80C, 80CCC, 80CCD allow you to invest in various tax saving schemes and claim a deduction of Rs 1, 50,000 during a year. The most popular tax saving investment schemes under these three sections are as follows:
  • Equity-linked saving scheme or ELSS comes with a lock-in period of 3 years and can be used to gain a tax benefit. This scheme is also known as a tax saving mutual fund and offers a huge return on investment.

Read More: Tax Saving Mutual Funds: Best ELSS Mutual Funds

  • Contribution to Employment Provident Fund
  • 5 year tax saving Fixed Deposit is used as a tax-saving instrument and one can gain an attractive interest.
  • Life Insurance Policy
  • National Saving Certificate (NSE) comes with a lock-in period of 5 years and 10 years. The minimum investment required is just Rs 100 and can be availed from the post office.

Even, you can claim a deduction of the same amount for tuition fees paid for children. But there is no tax benefit on infrastructure bonds.

  1. You are now also allowed an additional ₹50,000 deductions in investment in National Pension Scheme (NPS) under section 80CCD (1B).
  2. Also, you can claim a deduction of Rs 25,000 for the medical insurance policy for yourself and family from gross total income under section 80D. The deduction is higher in case of senior citizen parents.
  3. The interest paid on home loan for a self-occupied or rented home is exempted u/s 24 up to Rs 2 lakhs.
  4. You can even get an additional tax deduction under section 80EEB of Rs 1.5lakh on home loans on purchase of affordable homes or electric vehicles.

Tax Saving Tips For Salaried Person

  1. House Rent Allowance (part of salary)

You can save tax on your house rent under section 10(13) of the Income Tax Act. The minimum of the following four is available for tax exemption.

  • The actual HRA received by the employer
  • 50% of the basic salary plus DA if you are staying in metropolitan cities: Delhi, Kolkata Mumbai, and Chennai.
  • 40% of the basic salary plus DA if you are staying other than metropolitan cities
  • Actual house rent paid by you for the house minus 10% of basic salary plus DA
  1. House Rent Allowance (not part of your salary)

If HRA is not part of your salary, that is, you do not receive a salary from HRA, the least of the following can be claimed as deduction under section 80GG.

  • Rent paid minus 10% of the TI (Total income)
  • 5000 per month
  • 25% of total income
  1. Standard Deduction

Salaried and Pensioners can avail a standard deduction of Rs. 50,000 for the current financial year 2019-20.

  1. Gratuity

Gratuity is a retirement benefit that employers provide to employees when he completes five years of service at that company. Gratuity received on death or retirement by a state, central or local government employee is fully exempt from tax for the employee or his family.

Least of the following three is exempt if the employer is covered under Payment of Gratuity Act

  • Gratuity actually received
  • 15 days salary based on the salary last drawn salary (Basic salary plus DA) for every completed year of service or part thereof.
  • Rs 20,00,000

Least of the following three is exempt if the employer is not covered under the Payment of Gratuity Act

  • Gratuity actually received
  • For each completed year of service, a half month salary will be taken into consideration.
  • Rs 20,00,000


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