How To Save Income Tax On Salary

Tax planning is one of the ways which can help you save on taxes and increase your income. The income tax act provides deductions for various investments, savings and expenditures incurred by the taxpayer in a particular financial year. We will discuss some of the avenues which can help you save taxes.

Introduction

Salary under section 17(1) 

Under section 17(1), salary is defined to include the following :

1. 1. wages ;
   2. any annuity or pension ;
   3. any gratuity ;
   4. any fees, commission, perquisites or profits in lieu of or in addition to any salary or wages;
   5. any advance of salary ;
   6. any payment received by an employee in respect of any period of leave not availed by him;
   7. the portion of the annual accretion in any previous year to the balance at the credit of an employee participating in a recognised provident fund to the extent it is taxable ;
   8. transferred balance in a recognised provident fund to the extent it is taxable; and
   9. the contribution made by the Central Government or any other employer to the account of an employee under a notified pension scheme referred to in section 80CCD.

How to compute salary income

Salary income is calculated as under—

• Taxable Salary Income = Salary (-) Exemptions (Exempt allowances + Standard deduction +Professional Tax)
• Net taxable income= Taxable Salary Income (-) Deductions under chapter VIA.

Investments / Payments on which I can save taxes

Section 24(b) – Deduction from Income from House Property on interest paid on housing loan & housing improvement loan. In case of self- occupied property, the upper limit for deduction of interest paid on housing loan is  ₹ 2 lakh. However, this deduction is not available for person opting for New Tax Regime.

Interest on loan u/s 24(b) allowable is tabulated below:

Nature of Property	When loan was taken	Purpose of loan	Allowable (Maximum limit)
Self-Occupied	On or after 1/04/1999	Construction or purchase of house property	₹ 2,00,000
	On or after 1/04/1999	For Repairs of house property	₹ 30,000
	Before 1/04/1999	Construction or purchase of house property	₹ 30,000
	Before 1/04/1999	For Repairs of house property	₹ 30,000
Let Out	Any time	Construction or purchase of house property	Actual value without any limit

Tax deductions specified under Chapter VIA of the Income Tax Act which bring down the taxable income for an individual and thus reduce the tax payable.

These deductions will not be available to a taxpayer opting for the New Tax Regime u/s 115BAC, except for deduction u/s 80CCD (2), 80CCH which will be applicable for New Tax Regime as well.

Section 80C, 80CCC, 80CCD (1)
Deduction towards payments made to 80C Life Insurance Premium Provident Fund Subscription to certain equity shares Tuition Fees National Savings Certificate Housing Loan Principal Other various items 80CCC Annuity plan of LIC or other insurer towards Pension Scheme 80CCD(1) Pension Scheme of Central Government	Combined deduction limit of ₹ 1,50,000

Section 80CCD(1B)
Deduction towards payments made to Pension Scheme of Central Government, excluding deduction claimed under 80CCD (1)	Deduction limit of ₹ 50,000

Section 80CCD(2)
Deduction towards contribution made by an employer to the Pension Scheme of Central Government If the Employer is a PSU or Others Deduction limit of 10% of salary If the Employer is Central or State Government Deduction limit of 14% of salary

Section 80CCH

Deduction in respect of contribution to Agnipath Scheme Where an assessee, being an individual enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after the 1st day of November, 2022, has in the previous year paid or deposited any amount in his account in the said fund Allowed a deduction in the computation of total income, of the whole of the amount so paid or deposited Where the Central Government makes any contribution to the account of an assessee in the Agniveer Corpus Fund Allowed a deduction in the computation of total income of the whole of the amount so contributed

Section 80D
Deduction towards payments made to Health Insurance Premium & Preventive Health check up For Self / Spouse or Dependent Children ₹ 25,000 (₹ 50,000 if any person is a Senior Citizen) ₹ 5,000 for preventive health check up, included in above limit For Parents ₹ 25,000 (₹50,000 if any person is a Senior Citizen) ₹ 5,000 for preventive health check up, included in above limit

For Parents

Deduction limit of ₹ 50,000

Section 80DD
Deduction towards payments made towards maintenance or medical treatment of a Disabled Dependent or Paid / Deposited any amount under relevant approved scheme	Flat deduction of ₹ 75,000 available for a person with Disability, irrespective of expense incurred The deduction is ₹ 1,25,000 if the person has Severe Disability (80% or more).=

Section 80DDB

Section 80E
Deduction towards interest payments made on loan for higher education of Self or relative	Total amount paid towards interest on loan taken

Section 80EE
Deduction towards interest payments made on loan taken for acquisition of residential house property where the loan is sanctioned between 1st April 2016 to 31st March 2017	Deduction limit of ₹ 50,000 on the interest paid on loan taken

Section 80EEA
Deduction available only to individuals  towards interest payments made on loan taken for acquisition of residential house property for the first time where the loan is sanctioned between 1st April 2019 to 31st March 2022 & deduction should not have been claimed u/s 80EE	Deduction limit of ₹ 1,50,000 on the interest paid on loan taken

Section 80EEB
Deduction towards interest payments made on loan for purchase of Electric Vehicle where the loan is sanctioned between 1st April 2019 to 31st March 2023	Deduction limit of ₹ 1,50,000 on the interest paid on loan taken

Section 80G
Deduction towards Donations made to prescribed Funds, Charitable Institutions, etc. Donation are eligible for deduction under the below categories Without any limit 100% deduction 50% deduction Subject to qualifying limit 100% deduction 50% deduction   Note: No deduction shall be allowed under this section in respect of donation made in cash exceeding  ₹ 2000/-

Section 80GG

Section 80GGC
Deduction towards Donations made to Political Party or Electoral Trust	Deduction towards Donations made to Political Party or Electoral Trust

Section 80TTA
Deduction on interest received on saving bank accounts by Non-Senior Citizens	Deduction limit of ₹ 10,000/-

Section 80TTB
Deduction on interest received on deposits by Resident Senior Citizens	Deduction limit of ₹ 50,000/-

Section 80U
Deductions for a resident individual taxpayer with Disability	Flat ₹ 75,000 deduction for a person with Disability, irrespective of expense incurred Flat ₹ 1,25,000 deduction for a person with Severe Disability (80% or more), irrespective of expense incurred