How to Save Income Tax for FY 2024-25

For most people, paying income tax at the end of every year can be financially draining. But having a proper plan for income tax savings can definitely be helpful. Everyone likes to have an extra penny to spend on their own expenses than giving it away. The Government of India understands this. This is why it provides tax benefits which can be availed by the citizens.

Want to learn how to save income tax? Then you’re on the right page. This article will provide you with the best methods on how to save income tax for FY 2024-25.

Opt for home loan and enjoy tax benefits under Section 80C

Government has come up with various schemes in order to make housing more affordable and accessible to the citizens of India. Two examples of such schemes are PMAY (Pradhan Mantri Awas Yojana) and DDR (Delhi Development Authority) Housing Scheme. 

Section 80C and 24(b) of the Income Tax Act ensure that the money liability is reduced through lower tax burdens. Entire annual income which is spent on repaying the principal borrowed amount is eligible for deduction of up to 1.5 lakh as per Section 80C. Tax exemption is allowed on the interest portion of a house up to Rs 2 lakh per year as per Section 24(b). In addition to this, if an individual rents out a newly purchased house, the entire interest component is exempt from annual income tax computations. 

Individuals who buy land for the purpose of building a house on it eventually can also benefit from 24(b) provided that the construction is finished within 5 years. Additional reduction in an individual’s annual tax liability can be claimed if he is a first time homeowner as per Section 80EEA.

Buy a health insurance policy

As per Section 80D, individuals can claim tax deductions for the portion of their annual taxable income which is spent on the payment of premiums. Different sums are exempt from income tax computations depending on the age of the health insurance policyholder. Health insurance policies must only be purchased from insurance companies with an IRDA license.

Invest your money in government schemes

Many schemes launched by the Government of India provide high returns and tax waivers on total investments. As per Section 80C of the Income Tax Act, up to INR 1.5 lakh spent on investment under such schemes can be claimed as tax waivers, by the individuals, on the total annual income. 

Individuals can opt for the following government schemes availing tax exemptions:

• National Pension Scheme (NPS)
• Public Provident Fund (PPF)
• Sukanya Samriddhi Yojana (SSY)
• Senior Citizen Savings Scheme (SCSS)
• National Pension Scheme (NPS)

Buy life insurance plans

The rules for the premium payments of life insurance plans are stated in Section 80C of the Income Tax Act. Whereas, the rules for the sum promised received at maturity or early death of the insured, whichever happens first, is provided under the Section 10(10D0 of the Income Tax Act.

Individuals who have purchased life insurance plans after 1st April, 2012 can avail tax benefits of up to INR 1.5 lakh on annual premiums as per the Section 80C, given that it is less than 10 percent of the total sum assured. Individuals with life insurance policies purchased before 1st April, 2012 can file for claims as per 80C provided that the total premium payments do not cross 20% of the sum assured. 

Tax exemptions can also be availed in case of acquisition or renewal of life insurance coverage, and also for annuity payments on such plans which are made through an individual’s salary. In this case, tax exemptions are up to INR 1.5 lakh as per Section 80CCC of the Income Tax Act. Under Section 80CCD (1), only certain pension funds are eligible for tax exemption of up to INR 1.5 lakh.

Investment options under Section 80C

The most common tax-saving options to citizens in India in accordance with the Section 80C of the Income Tax Act includes several investments and expenses which are eligible for claim deduction up to INR 1.5 lakh in a financial year. 

Donate to Charity

According to Section 80G of the Income Tax act, donations made by an individual to certain organizations in the form of cash are eligible for tax waiver of INR 2,000. In case of wired and bank transfers for donating to such organizations, an individual can avail the benefit of complete or partial tax exemption, respectively. 

Individuals who donate their money to an organization that is involved in scientific research or rural development can enjoy deductions as per Section 80GGA. In case of cash donations, partial waivers are granted. Whereas in case of donations made through cheque or draft, complete tax waivers are granted. 

Support a Political Party

As per Section 80GGC of the Income Tax Act, individuals who support a political party by providing donations or those who contribute to electoral trusts are eligible for tax waivers. If the organization is registered under Section 29A of the Representation of People Act of 1951, individuals who donate to this organization/political party are eligible for availing tax exemption on the entire donated amount. It is necessary for these donations to be made through wired or bank transfers. Cash deposits are not allowed in this case.

Other Tax Saving Options

Hopefully, all the above-mentioned methods have given you ideas for saving tax in India. Apart from these methods, there are a few pointers which must be considered while looking for methods which can save tax.

• You can turn down payment of tax on the interest component of education loans as per Section 80E of the Income Tax Act. However, this is only applicable for the first 8 years of repayment of loan.
• As per Section 80DDB, tax exemption is applicable in case of expenditure incurred by individuals for the purpose of medical treatment. To receive tax waivers, individuals can submit medical bills of up to INR 40,000 for treatment of specific diseases. Senior and super senior citizens get extended tax benefits which amount up to INR 1 lakh. There is tax exemption for treatment charges for these diseases: AIDS, neurological diseases, malignant cancer, renal failure, or hematological diseases.
• As per Section 80DD, an individual can claim tax exemption for hosting a dependent family member with a permanent disability. This tax exemption is applicable on all expenses borne for funding such a family member’s livelihood. This is also applicable in case of disabled HUF members.
• For individuals having a disability of 40% or higher, up to INR 75,000 of tax exemption can be claimed for financing their expenses. In case of individuals having 80% or higher disability, up to INR 1,25,000 of tax exemption can be claimed by those who finance their expenses.
• Individuals must provide all the necessary documents for the cost of medical treatments as well as proof of disability. For further clarification, you can refer to Section 2(i) of the Persons of Disabilities Act, 1955. 
• A disabled person can avail tax wives of the same accord under 80U.

Your total taxable income will substantially reduce for FY 2024-25 if you meet the requirements for tax exemption. To get subsequent proceeds, don’t forget to submit income tax return form and form 16 provided by your employer.

How to plan your tax-saving investments for the year?

When a financial year begins, it is the best time to plan your finances, including all your investments. Many individuals who pay tax do not have a proper planning for finances and struggle in the last quarter of the financial year and make hasty decisions which can be financially draining. It is crucial to make financial plans when the year begins as this can help you to achieve your goals for the long term. It is necessary to keep in mind that tax saving must be included as an additional perk in your financial planning and not as a goal in itself.

Consider these pointers which can help you in saving tax:

• Make a list of tax-saving expenses which you probably already have such as insurance premiums, tuition fees of your child, contribution to EPF, repayment of home loan repayment among others.
• Deduct the amount of all these expenses from INR 1.5 lakh so that you can figure out how much you can invest. You do not have to invest the complete amount if these expenses cover the limit.
• Opt for a tax-saving investment which is in sync with your goals and risk appetite. 
• Choose tax-saving investments based on your goals and risk profile. Some popular options that you can opt for are ELSS funds, PPF, NPS and fixed deposits are some of the popular options.

With the help of these pointers, you can easily figure out how to exhaust the limit of INR 1.5 lakhs under Section 80C. If you start Investing in the first quarter of the financial year, it will help in ensuring that the investments are spread over the year. This will not cause financial burden on you in the last financial quarter of the year and it’ll also provide you ample time to make informed decisions related to your investments.

Conclusion

In the wise words of Benjamin Franklin, ”There are only two things certain in life: death and taxes”. When it comes to death, there’s not much we can do about it. But in the case of taxes, you can definitely reduce how much tax you pay on an annual basis. Investing your money in various government schemes, health insurance, etc. can be helpful in reducing your tax burden through legal means. Make sure you plan your finances wisely in the beginning of the financial year. In case you need any assistance for services related to income tax, such as for ITR filing, you may get in touch with Registrationwala’s team.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.