9 ways to cut your income tax outgo

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The deadline for filing income tax returns for fiscal year 2020-21 has been moved from September 30 to December 30, 2021. This three-month extension is good news for people who wish to save money on taxes by doing better planning. Let’s take a look at the tax breaks you can get on your investments, profits, and other sorts of payments. It should be noted that this does not apply to the new taxation system.

1. Home loan interest can be deducted from your taxes

The interest paid on a house loan can be deducted under Section 24(b) of the Income Tax Code. The Income Tax Act allows you to deduct up to Rs 2 lakhs in interest payments from your taxable income. This tax exemption is only available if the property is self-occupied.

2. Life insurance premiums, PF, PPF, and Pension Plan

You are entitled to several tax exemptions under Section 80C of the Income Tax Act. If you have Life Insurance Corporation (LIC) insurance, you can, for example, claim the premium. Section 80C exempts the principle of a provident fund, a PPF, children’s tuition expenses, a national savings certificate, and a home loan. Section 80CCC allows you to claim a tax exemption if you purchase an annuity plan (pension plan) from LIC or another insurance provider. Keep in mind that the overall tax exemption amount cannot exceed Rs 1.5 lakh.

3. The central government’s pension scheme

If you invest in the central government’s National Payment System (NPS) pension system, you will qualify for an additional Rs 50,000 exemption under section 80 CCD (1B). This exemption is in addition to the Rs 1.5 lakh tax benefit provided by Section 80. (C). You can claim your employer’s contribution to the Central Government’s pension fund under Section 80 CCD2. It is conditional on two factors.

First, regardless of whether the employer is a public sector unit (PSU), state government, or other, the deduction maximum is 10% of the pay. If the employer is the federal government, the deduction is limited to 14 %.

4. Make a claim for the principal amount of your home loan

Section 80C allows you to deduct the principal payment on your home loan. However, this restriction cannot exceed Rs 1.5 lakhs. So, if your remaining deductions under 80C are less than 1.5 lakhs, you can claim a tax break by deducting the difference from the principal amount of your home loan.

5. The premium from health insurance

Even though there is a limit, you can deduct the premiums paid under section 80D of the tax code provided you have health insurance or regular health examinations. If you have obtained health insurance for yourself, your spouse, your children, and your parents, you can claim a premium refund of up to Rs 25,000.

In this case, the parents’ ages should be less than 60. If your parents are senior citizens, the tax exemption ceiling is Rs 50,000. A Rs 5000 health checkup is also included. However, the tax deduction cannot exceed the cost of health insurance.

6. Disabled dependents’ medical and upkeep costs

Expenses for the treatment and upkeep of disabled dependents are reimbursable. You can claim up to Rs 75,000 each year. Medical expenses can be claimed as a tax deduction of Rs 1.25 lakh if the dependent individual has an 80 percent or more with disability.

7. Medical treatment payments are not taxed.

The Income Tax Act, Section 80 DD (1B), permits a deduction of up to Rs 40,000 for treatment of a specific disease of oneself or a dependent. If the individual is over the age of 65, the limit is Rs 1 lakh.

8. Obtaining a financing for an electric vehicle

If you take out a loan to buy an electric vehicle, you can deduct up to Rs 1.5 lakh in interest under Section 80EEB of the Income Tax Act. This tax benefit, however, will be available only for loans taken between April 1, 2019, and March 31, 2023.

9. Allowance for house rent

If your salary does not include HRA, you can claim a housing rent payment under section 80GG. However, if your job provides HRA, you cannot claim dwelling rent under 80 GG.