Paying taxes is every citizen’s responsibility, but if you are not careful, you can end up paying more than what may have been necessary. A number of tax saving options are available under Income Tax rules and you need to utilize these to the maximum. As part of your financial planning, you should begin by ascertaining your overall tax liability. For this, you can use an income tax calculator. After calculating your tax liability, you can proceed to choose the tax saving options that you are eligible for.
Using an online income tax calculator, you can calculate tax savings available under various sections of the Income Tax Act.
Deductions under Section 80C/80CCC: Under this section, you are eligible for tax deductions of up to Rs 1,50,000. You will be eligible if you have made investments such as 5-year fixed deposit, public provident fund (PPF), term insurance policy, unit-linked insurance plan, equity-linked saving scheme, endowment insurance policy and retirement insurance plan. You can get an additional deduction of up to Rs 50,000 if you have invested in NPS. This is available under Section 80CCD(1B) of the Income Tax Act. To know more on the Income Tax Act, read more.
Deduction under Section 80D (Health Insurance Premium): Under this section, you can claim a deduction for premium paid on the health insurance policy taken for self, spouse, children and parents. If you are below 60 years, the maximum deduction allowed for health insurance premium paid for self, spouse and children is Rs 25,000. If you have taken a policy for your parents who are senior citizens, then you will get an additional deduction of Rs 50,000. If you are also a senior citizen, you will be eligible for Rs 50,000 deduction. Just enter the details in the income tax calculator to know the amount of tax you can save under Section 80D.
Deduction under Section 10(13A) HRA: You can claim a deduction for HRA (House Rent Allowance) if you live in rented accommodation and pay rent. Total deduction allowable under this section will be the minimum of the following:
- 50% of basic salary for people residing in metro cities – Delhi, Mumbai, Chennai and Kolkata. At other locations, the amount will be 40% of the basic salary
- Actual rent paid minus 10% of basic salary OR
- Actual HRA amount received
Deduction under Section 24: You can claim a deduction of up to Rs 2 lakh for interest paid on your home loan EMIs. Just enter the actual amount of interest paid in the income tax calculator to know your tax savings under this section.
Deduction under Section 80E (Education Loan): Under this section, you can claim a deduction for interest paid on education loan EMIs. There is no maximum limit under this section and you are eligible to claim a deduction for the entire amount of interest paid in a year. However, such deductions will only be available for a maximum period of 8 years.
Deduction under section 80TTA (Interest earned): You can claim a deduction of up to Rs 10,000 for interest earned on savings account with a bank, co-operative society or post office.
Deduction under section 80TTB: This is available to senior citizens and has an upper limit of Rs 50,000. It applies to interest earned by senior citizens on deposits in banks, post office and co-operative society.
An income tax calculator is a hassle-free way to know your tax liability. You can also find out which tax saving option is best for you. You can then choose to invest accordingly to maximize your tax savings. We recommend you get started right away, as the July 31st deadline of filing tax returns is not very far away.