Tax & Business News, Simplified.

Taxpayers Alert! Essential Tips for Maximizing Tax Savings Before the FY 2023-24 Deadline

As the financial year ending March 31, 2024, approaches, taxpayers are preparing for the upcoming year. It’s crucial to also consider the current fiscal year, FY 2023-24, and take steps to save on taxes before the deadline. Here are some important tips to optimize tax-saving opportunities.

1. Invest in tax saving options

To leverage tax deductions under Section 80C of the Income Tax Act, consider options like the Employee Provident Fund (EPF) for salaried individuals, where 12% of the basic salary is invested monthly; the Public Provident Fund (PPF), a secure, 15-year government scheme with partial liquidity after 7 years and approximately 8% returns; and Equity Linked Savings Schemes (ELSS), offering market-linked returns with a 3-year lock-in period. These avenues not only facilitate tax savings up to Rs 1.5 lakh but also ensure your investments grow over time.

2. Unlock Tax Savings with Government Schemes

Optimize your returns and avail tax benefits through government schemes. Section 80C of the Income Tax Act allows a deduction of up to Rs 1.5 lakh from your total annual income. One can explore these options for tax exemptions:

Senior Citizen Savings Scheme (SCSS)

Sukanya Samriddhi Yojana (SSY)

National Pension System (NPS)

3. Benefits of owning an electric vehicle

A deduction of up to Rs 1,50,000 for interest payments is available under Section 80EEB. “Whether an individual taxpayer possesses an electric vehicle for personal or business use, this deduction allows for the claiming of interest paid on the vehicle loan subject to the loan must be sanctioned between April 1, 2019, and March 31, 2023, to be eligible for the deduction,” says Prateek Mehta, Chief Business Officer, Angel One.

4. Maximize Your Tax Savings with Health Insurance Deductions

Taxpayers have the opportunity to significantly reduce their taxable income by claiming deductions on health insurance premiums. If you pay health insurance for yourself, your spouse, and your dependent children, you can claim a deduction of up to Rs 25,000. Furthermore, if you also pay for your parents’ health insurance, you’re eligible for an additional deduction of the same amount, Rs 25,000. “For senior citizens, this deduction is even more generous. Both for insuring yourself if you’re a senior, and for senior citizen parents, the deduction limit increases to Rs 50,000. This means potential tax savings on health insurance premiums could reach up to Rs 75,000 or Rs 100,000, depending on the age of the insured,” informs Mehta.

5. Boost Your Tax Savings Through Charitable Donations

Enhance your tax-saving strategy by making voluntary contributions to various causes and organizations. Whether you donate to the Prime Minister’s Relief Fund, initiatives for controlling drug abuse, the Clean Ganges Fund, or to certified NGOs, your generosity not only supports valuable causes but also offers you tax benefits. Donations made to these entities are eligible for full tax exemption under Section 80G of the Income Tax Act, allowing you to reduce your taxable income while contributing to societal welfare.

6. Pradhan Mantri Vaya Vandana Yojana for senior citizens

The Pradhan Mantri Vaya Vandana Yojana is open for enrollment until March 31, 2024. This initiative provides senior citizens with a steady income in exchange for a one-time investment. Individuals aged 60 and above are eligible for this scheme, offering a current annual interest rate of 7.4%. The PMVVY has a tenure of 10 years.

7. Fourth installment of advance tax payment: March 15

If your net income tax liability in a financial year exceeds Rs 10,000, you must pay advance tax—calculated as estimated tax liability minus TDS. “The Income Tax Act, 1961, mandates four quarterly payments to avoid penal interest. However, not all individuals with net income liability above Rs 10,000 are obligated to pay advance tax due to certain exemptions. For the current FY 2023-24 (AY 2024-25), the fourth installment of advance tax paymentisdue on March 15,” says Mehta.

Top 7 Tax Saving Options for Salaried Individuals 2023

1. Tax Saving under Section 80C, 80CCC and 80CCD(1)

When it comes to saving income tax, Section 80C is the section that offers the maximum number of tax-saving schemes. The maximum limit permissible under Section 80C is Rs.1.5 Lakh and only individuals and Hindu-Undivided Families (HUFs) can claim tax deduction under this section. Further, one cannot claim tax deductions through the investments listed under 80C in the case of income obtained from capital gains.

If you wish to save on taxes, invest in one of the following tax-saving schemes or instruments to claim tax deduction under Section 80C: Employee Provident Fund (EPF), Public Provident Fund (PPF), Annuity/Pension Schemes, Tax-Saving Fixed Deposits, Post Office Time Deposits, etc. One can also claim tax benefits on payments made towards the tuition fees of children as well as payments made towards the principal component repayment of their home loan.

Taxpayers must know that if they are claiming tax benefits under Section 80C through the home loan tax benefits available to them, they cannot sell their home within five years of buying it. Doing so would lead to the income tax benefits that one has claimed getting automatically reversed. Further, only those home loan borrowers can claim tax benefits under Section 80C who are also co-owners in the property.

2. Tax Saving Options Under Section 80D

Under Section 80D of the Income Tax Act, one can claim tax benefits on medical expenses. Under Section 80D, one can claim tax deductions on medical insurance premiums that one is paying for their self, family members, and dependent parents. One can claim tax deductions up to a maximum of Rs.25,000 in the case of medical premiums made towards oneself or family. If one is paying a medical insurance premium for parents who are also senior citizens, one can claim up to Rs.50,000 under Section 80D. Further, salaried individuals can also claim an additional Rs.50,000 on money spent towards covering the medical expenses of a senior citizen parent. However, one can claim this amount only if the amount is not covered under the health insurance policy. One can also claim an additional Rs.5,000 spent towards the health check-up of self or family members under this section of the Income Tax Act.

Salaried individuals must know that sometimes their employer will deduct Mediclaim premium directly from their salary. One can also claim tax benefits on such deductions while filing taxes at the end of the year.

3. Section 80E: Maximizing Tax Savings

If a salaried individual has availed themselves of an education loan to fund their education or the education of a spouse or children, they can claim tax deduction on the interest component of the loan under Section 80E of the Income Tax Act. There is no maximum limit mentioned under this section. Further, even if a person has claimed tax benefit under Section 80C, they can still claim tax deduction under Section 80E.

However, one can claim this tax benefit only if one has availed of an education loan from a bank or a recognized financial institution. One can start claiming this tax benefit from the year they start repaying their loan and can continue to claim tax benefit under this section until they have repaid the loan in full. The maximum loan tenor for education loans is generally 7 years and one can claim tax benefits under Section 80E for a maximum of 8 years.

4. Income Tax Benefit Under Section 80G

If a salaried individual makes donations to charitable institutions, one can claim a tax deduction under Section 80G. Under this section, taxpayers can claim tax benefits on either 50% or 100% of the total amount donated by them.

5. Tax Deductions Available Under Section 80TTA

How to save tax on salary? Salaried individuals who have a savings account can claim tax benefits up to a maximum of Rs.10,000 on income earned from their savings account. If the income earned is below Rs.10,000, one can claim a tax deduction on the entire amount. However, if the income earned is more than Rs.10,000, one can claim up to a maximum of Rs.10,000 only.

6. Leveraging Section 24B for Tax Savings

Salaried individuals who have availed themselves of a home loan can claim home loan tax benefit on the interest component of their home loan under Section 24b of the Income Tax Act. The maximum amount that one can claim under this section is Rs.2 Lakh. There are a few things that home loan borrowers must know about claiming home loan tax benefits under Section 24b. To start with, one can claim tax deduction under this section of the Income Tax Act even in the case of under-construction properties.

However, in the case of under-construction properties, one can claim tax benefits only after construction on the property is completed and in five equal instalments spread over 5 years. Further, pre-construction and post-construction interest on which one can claim tax benefits cannot exceed Rs.2 Lakh.

Couples who have taken a joint home loan and home loan co-borrowers who are also co-owners can maximize tax savings by claiming tax benefits separately under Section 24b of the Income Tax Act. If the borrower has let out the property against which they have taken a home loan, there is no maximum limit on the amount that one can claim as a tax deduction under Section 24b.

7. Section 80EE & 80EEA: Tax Perks Unveiled

Home loan is one of the key tax-saving instruments that taxpayers have access to and a home loan can help a taxpayer save considerably in terms of taxes. Over and above the tax benefits available on home loans under Section 80C and Section 24b of the Income Tax Act, first-time homebuyers can claim an additional tax benefit up to a maximum of Rs.50,000 under Section 80EE and up to a maximum of Rs.1.5 Lakh under Section 80EEA of the Income Tax Act provided the borrower meets certain conditions.

One can claim tax benefits under Section 80EE only if the price of the property bought with the loan money does not exceed Rs.50 Lakh and the home loan amount does not exceed Rs.35 Lakh. Further, only first-time homebuyers who had availed a home loan between April 1, 2016, and March 31, 2017, can claim tax benefits under this section. First-time homebuyers who have invested in affordable housing and are not eligible to claim home loan tax deduction under Section 80EE can claim home loan tax deduction under Section 80EEA up to a maximum of Rs.1.5 Lakh provided they meet certain conditions. To start with, they must have availed of a home loan between April 1, 2019, and March 31, 2021. Further, the stamp duty of the property must not be more than Rs.45 Lakh.

Must Know : Allowances & Deductions for Salaried Employees

List of Allowances & Exemptions relevant to Salaried Employees :

S.No	Section	Nature of deduction	Amount	Whether available in the new regime?
1.	16	Standard Deduction	50,000	Not Available
2.	16	Employment Tax (Professional Tax)	Actual	Not Available
3.	80C	Life Insurance Premium – Self,Spouse, Child	Actual (Subject to a limit of 1,50,000 and other conditions)	Not Available
4.	80 C	Contribution Made to PF Account	Actual (Subject to a limit of 1,50,000)	Not Available
5.	80 C	Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children.	Actual (Subject to a limit of 1,50,000)	Not Available
6.	80C	Housing Loan – Principal Amount	Actual (Subject to a limit of 1,50,000)	Not Available
7.	80 CCD (1)/(1B)	Contribution to NPS	50,000 (Additional limit on & above limit of 1.5 lakh)	Not available
8.	80 CCD(2)	Employer Contribution to NPS	10 % of Salary+DA	Available
9.	80 D	Amount paid for health insurance of self, spouse, dependent children or parents	For self, spouse and dependent children : Rs. 25,000 (Rs. 50,000 if person insured is a senior citizen); For parents of the assessee : (Additional) Rs. 25,000 (Rs. 50,000 if person insured is a senior citizen) Medical expenditure if no amount is paid in respect of health insurance– Rs.50,000 (only in case of senior citizen) Aggregate amount of deduction cannot exceed Rs.1,00,000 in any case	Not Available
10.	80 E	Interest on Education loan – (maximum period : 8 years)	Actual	Not Available
11.	80 EEB	Interest payable on loan purpose of purchase of an electric vehicle.	Actual (Subject to limit of 1,50,000)	Not Available
12.	80 GG	Rent	Lower of : a)5000 p.m b)Rent paid – 10% of Total Income c)25% of Total Income	Not Available
13.	10(13A)	House Rent Allowance	Least of the following is exempt: a) Actual HRA Received b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras) c) Rent paid minus 10% of salary Note: i. Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 08 /2013 dated 10th October, 2013]	Not Available
14.	10(14)	Conveyance Allowance	Actual	Available
15.	10(14)	Travelling Allowance – to meet the cost of travel on tour or on transfer	Actual	Available
16.	10(14)	Daily Allowance – to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty	Actual	Available
17.	10(14)	Helper Allowance, Uniform Allowance	Actual	Not Available
18.	10(5)	LTA	Two journeys in a block of 4 calendar years is exempt	Not Available
19.	10(10AA)	Leave Encashment	Least of the following shall be exempt from tax: a)Amount actually received b) Unutilized earned leave (Subject to limit of 30days for each year of Service) X Average monthly salary c) 10 months Average Salary d) Rs. 3,00,000	Available
20.	10(10)	Gratuity	Least of following amount is exempt from tax: 1. (15/26)* X Last drawn salary X completed year of service or part thereof in excess of 6 months. 2.Rs. 20,00,000 3.Gratuity actually received. * If not covered under Gratuity Act – Half month’s Average Salary* X Completed years of service	Available
21	24	Interest on Housing loan	Self Occupied – Actual (Subject to limit of Rs 2,00,000) Let Out – No Limit* *However Interhead Set off with Salary permissible up-to a limit of 2 lakh.	Self-occupied -Not Available

Tag: Tax Saving tips for salalried