If you are a first-time taxpayer, you might be looking to reduce your tax burden. There are a lot of tax deductions and exemptions which can help you save tax. If your annual income is around 10 lakh, you can reduce the tax outgo to zero.
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Investments under Section 80C include premiums on life insurance plans, EMI (principal) on the home loan, Investments in ELSS, PPF, NSC, Sukanya Samriddhi Yojana, Senior Citizen Savings Scheme, Tax Saver FD and some other investments. These investments will be eligible for tax deductions up to Rs 1.5 lakh a year.
You can avail a maximum deduction of Rs 1.5 Lakhs a year, on the total investments that qualify for a deduction under Section 80C.
Payment made towards health insurance premiums are eligible for a deduction under Section 80D. Individuals, less than 60 years can claim a deduction up to Rs 25,000 a year, on the health insurance premiums paid for themselves, spouse and dependent children. If your parents are senior citizens, you get a deduction of Rs 30,000 a year on health insurance premiums.
Investment in NPS is eligible for a tax deduction up to Rs 1.5 Lakhs under section 80C of the income tax act. You also get additional tax deductions up to Rs 50,000 a year, under section 80CCD(1B) on money invested in NPS.
You have a tax rebate of Rs 2,500 a year under Section 87A for the FY 2017-18. You will be eligible for the rebate only if your total income, less all deductions under section 80, is less than or equal to Rs 3,50,000.
Interest paid on home loans are eligible for a deduction up to Rs 2 Lakhs a year, under Section 24 of the Income Tax Act. You will also be eligible for an additional tax exemption of Rs 50,000 a year, under Section 80EE, if you are a first time home buyer.
Some employers offer their employees the medical reimbursement facility for medical expenses. If your employer offers you this facility, you get medical reimbursement up to Rs 15,000 a year, on furnishing medical bills. This amount is exempted from tax.
You get medical reimbursement up to Rs 15,000 a year on medical treatment for self + family members.
Transport allowance is offered to you (an employee), to compensate for travel from home to the workplace and back. You get a tax exemption up to a maximum of Rs 19,200 a year as transport allowance.
You can save tax by donating your money to charitable activities. You will get a tax deduction under section 80G on the money donated to certain charitable institutions and specific relief funds.
You earn a salary of Rs 8.5 Lakhs a year. Let's calculate income tax paid after availing tax deductions.
Tax liability can be reduced by using the tax rebate under Section 87A. You can contribute your income to specific tax relief funds or there are more tax exemptions and deductions you can avail to pay zero tax. Be Wise, Get Rich.
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