Tips to save tax without making any investment!

March marks the end of the financial year. It’s the time when taxpayers calculate their tax liability while considering deductions and exemptions on their current year’s income. Failing to avail deductions could result in paying more taxes. Most people utilize Section 80C to its fullest by investing in schemes like PPF, NPS, and ELSS. However, they often forget about ways to save taxes without making investments. Let’s explore these methods.

At the top of the list for saving taxes without investments is House Rent Allowance (HRA). HRA is a component of a salaried employee’s salary. Deductions on HRA can be claimed under Section 10(13A) of the Income Tax Act. The condition for claiming HRA is that you must receive HRA from your company and pay rent for the house you reside in. For those living in their own house, the HRA amount is taxable.

There are conditions to claim House Rent Allowance (HRA):
First – The actual amount received as HRA,
Second – 50% of Basic Salary plus DA in metro cities and 40% in non-metro cities,
Third – After deducting 10% of Basic Salary plus DA from the annual rent of the house.

The least of these three amounts can be claimed as a deduction.

Everyone desires a roof over their head. Income tax also encourages this sentiment. Under Section 24(b) of the Income Tax Act, tax deduction can be claimed for buying or constructing a house with a home loan. For self-occupied property, there’s a deduction of up to Rs 2 lakh on the interest on home loan. If the property purchased with a loan is rented out, then, deduction can be claimed on the entire interest amount.

We take education loans to build our careers. But this loan can reduce the taxable amount from our pockets. Under Section 80E of the Income Tax Act, deduction is available for taking loans for higher education, i.e., post-12th education, for oneself, spouse, or children. This deduction is on the interest portion of the loan. There is no upper limit on this deduction. However, the total amount of deductions under Chapter VI-A should not exceed the individual’s gross total income. This deduction is available for up to 8 years from the start of the EMI.

Considering the inflation in healthcare costs, health insurance is essential. Under Section 80D of the Income Tax Act, tax relief is provided on health insurance premiums. If you take health insurance for yourself, spouse, and children, you can claim a deduction of ₹25,000. If senior citizens (parents) are covered under the policy, you can claim a deduction of ₹50,000. If both you and your parents are senior citizens and you take health insurance for them, you can claim a deduction of up to ₹1 lakh. Additionally, there’s a deduction of ₹5,000 for preventive health check-ups within this realm.

If an employee receives children’s allowance for the child’s education and hostel allowance for hostel expenses from the employer, then, exemption can be claimed under Section 10 of the IT Act. For a child’s education allowance, you can save tax on an annual amount of up to ₹1,200, and for hostel expenses, up to ₹3,600. This exemption is provided for a maximum of two children.

Meanwhile, parents who pay their child’s tuition fees in recognized universities, colleges, schools, or other educational institutions can claim a deduction of up to one and a half lakh rupees under Section 80C. Both salaried and self-employed individuals can benefit from this. Under Section 80(C), this deduction is limited to the fees of a maximum of two children. No tax relief is available on tuition fees paid to foreign educational institutions.

Opting for the old tax regime for the financial year 2023-24 is the only way to avail the benefits of these deductions which aid in reducing tax liability. In the new tax regime, you won’t get the benefit of most deductions. However, tax rates are lower in this new regime.