I am 27-year-old working for a multinational company (MNC), drawing a net salary of ₹1.4 lakh per month. My annual income is ₹22.3 lakh, of which my taxable income is ₹15.5 lakh. My tax-savings come from section 80C instruments, where I utilize the maximum limit of ₹1.5 lakh per annum (p.a.), and exemption from house rent allowance (HRA) is ₹2.8 lakh p.a. There is professional tax of ₹2,400 p.a. I have also purchased a flat for which I have taken a home loan of ₹36 lakh at 9.2% interest rate. My equated monthly instalment (EMI) comes to ₹30,000. How can reduce my taxable income further?
—Name withheld on request
Salaried individuals try and maximize their tax savings by claiming various exemptions and deductions while computing taxable income. The old tax regime allows an individual to save income tax through various exemptions and deductions like medical insurance premium, HRA, etc. However, if an individual opts for the new tax regime, then he or she cannot claim the above-mentioned deductions. In the current case, we have assumed that you are planning to opt for the old tax regime.
You can use Section 80CCD (1B) of Income Tax Act (IT Act), wherein additional deduction of ₹50,000 is allowed in a financial year for investments made in National Pension System (NPS). Such deduction is over and above the deduction of ₹1.5 lakh provided under section 80C.
The Section 80CCD (2) of IT Act allows deduction on employer’s contribution to NPS. The employee is allowed to claim deduction of up to 10% of salary (assuming you are not a government employee) in case an employer makes contributions to NPS.
Section 80D allows deduction for medical insurance premium paid for an individual (as well as spouse and dependent children) of up to ₹25,000. Additional deduction of ₹25,000 is available if insurance is taken for parents ( ₹50,000 can be claimed if parents are senior citizens).
The Section 80TTA allows you to claim deduction of up to ₹10,000 in a financial year, for interest earned from savings bank account. If the interest income earned is below ₹10,000, you may claim a deduction of the whole amount.
You can claim a tax deduction under section 80G of either 50% or 100% of the total donation to a charitable institution. Also, you may analyse the salary components offered by the employer and opt for those salary components which help maximize tax benefits.
Aditya Goyal is a Bengaluru-based chartered accountant.
“Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!
Download The Mint News App to get Daily Market Updates.
More
Less
Updated: 04 Oct 2023, 09:35 PM IST
Denial of responsibility! My Droll is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.