March marks the end of the financial year and is the time when taxpayers should evaluate their tax liability taking into account eligible deductions, based on their income for that financial year (FY). Not taking advantage of some qualified deduction can increase your tax outflow.
It should be noted that from FY 2020-2021, the taxpayer can choose to pay the tax under the new concessional tax regime. In the event that the taxpayer opts for the new tax regime, he must forego most of the tax deductions and exemptions. In some cases, the taxpayer may want to choose the current tax regime, but due to liquidity problems, especially in the case of the Covid-19 pandemic, they may not be able to make more investments to save taxes. These taxpayers need not be discouraged because some expenses also qualify for a tax deduction. So know how you can save tax without investments.
The deductions to which the taxpayer is entitled must be claimed from the gross total income, thus reducing the taxable income and therefore, the tax to be paid.
Here's a look at the expenses/deductions that can be used to save tax without investment under the old tax system.
Leave travel allowance
Section 10 (5) of the Income Tax Act provides a deduction towards the leave travel allowance (LTA) based on the provision of proof of travel and related expenditure, which are subject to certain terms. This discount can only be used for a maximum of two journeys within India in a block of four calendar years (2018-2021).
However, in FY 2020-2021, many taxpayers were unable to take actual journeys due to travel restrictions related to the pandemic. With this in mind, the government has launched the 'LTC Cash Voucher` scheme.
Under the scheme, the employee can save tax without investment from an exemption for the cash allowance received in lieu of the LTC according to certain conditions that the taxpayer must meet.
Since this qualified category of goods and services is broad, this system can easily be used by salaried taxpayers. However, it is worth noting that employees who have already benefited from the LTC exemption twice for their current 2018-21 group are not eligible to benefit from this scheme. Also, in the private sector, only employees who have an LTA as part of their salary structure can benefit from the scheme if their company offers them the scheme.
Deduction of interest income
Taxpayers who receive interest income from a savings account at a bank or post office are eligible to claim a deduction under Section 80TTA of the Income Tax Act. The discount amount will be less than the derived interest or Rs 10,000. For senior citizens residents who want to save tax without investment, this limit is Rs 50,000 according to Section 80TTB. Seniors can also take advantage of the Section 80TTB discount on the interest income from fixed deposits, Senior Citizen Savings Scheme, etc.
Children's tuition fees, Education and Hostel Allowance, and tuition fees
Any allowance (up to specified limits) for children's education as well as hostel expenses (commonly known as Children Education Allowance & Hostel Allowance) granted to an employee by the employer is allowed as an exemption under Section 10 (14). You can save tax without investment by The exemption from the children's education allowance and the Hostel allowance is limited to Rs 1,200 and Rs 3,600 per year, respectively, for up to two children.
Furthermore, under Section 80c, tuition fees paid to any recognized university, college, school, or other educational institution in India, for the purpose of the full-time education of any two children, are eligible for the deduction. Any individual taxpayer (paid or not) can take advantage of this deduction if the tuition fees described above are paid for their children. However, the amount allowed as tuition fees will not include the payment in the nature of development fees, or donation fees, Capitation fees, or payments of a similar nature. Also, the discount is not available if payment is made to a foreign educational institution.
It is also important to note that the children's education allowance is different from the tuition fee. Children's education allowance is only available as a deduction if it is part of the salary component and the taxpayer has already incurred expenses for the education of their children. The amount of the allowance deductible is Rs 1,200 per year per child, up to two children. However, in the case of tuition fees, it is allowed on the basis of actual expenses incurred for the education of the children up to the amount of Rs 1.5 lakh under Section 80c, although they may not be part of the taxpayer's salary component.
Deduction of interest on educational loan
Section 80E provides for a deduction for interest paid on an education loan provided by an approved financial or charitable institution. The deduction can be claimed from the total gross income of the taxpayer, thus reducing taxable income. One can save tax without investment by The discount is available for 8 consecutive years from the year the taxpayer begins to pay interest. The loan must be taken for higher education purposes, that is, any course after passing the upper secondary exam or equivalent, in India or abroad. An Education loan can be taken for the education of a taxpayer, husband, wife, children, or student of whom the taxpayer is the legal guardian.
Deduction in case of Medical insurance, expensive and preventive health checkups
Section 80D provides for a deduction in respect of health insurance premiums paid, expenses for preventive medical examinations, and other eligible medical expenses. A deduction of up to Rs 25,000 can be claimed for the health insurance premium for oneself, spouse, or dependent children. An additional deduction of up to Rs 25,000 can be claimed for the health insurance premium paid to parents under the age of 60. The discount is also available if you buy a Covid health insurance policy like Corona-Kavach.
Also, in cases where the insured is an elderly person, the above deduction limit is Rs 50,000. For the Senior citizen, who does not have health insurance, medical expenses can be claimed as a deduction under this section subject to a total limit of Rs 50,000. The department also allows a deduction for the costs of the preventive health examination up to 5,000 rupees. These expenses are included in the total limit, as applicable. The aforementioned expenses must be incurred in any mode other than cash. However, the costs of the preventive health exam may be incurred in cash. The discount should be available to seniors even if they incur out-of-pocket medical expenses. They can also save tax without investment through this way.
Deduction in respect of interest on loan taken for a residential house property
If a residential property is purchased by taking a home loan, then a person can claim two types of tax breaks: a discount for repayment of the home principal under Section 80c and a deduction for interest payments made on the home loan u/s 24. The latter will be limited to a maximum of Rs 2 lakh per year in the condition of self-occupied property.
Also, if someone buys a home on the affordable side, they will receive a Rs 1.5 lakh discount in a tax year under Section 80EEA. This discount is in addition to the Rs 2 lakh discount available on home loan interest payments. It is available on a housing loan obtained between April 1, 2019, and March 31, 2021, for the acquisition of a residential house whose stamp duty does not exceed 45 rupees. Therefore, you can save tax without investment by the total deduction available to the individual taxpayer on paying interest on a home loan to purchase an affordable home is Rs 3.5 lakh in a tax year.
Deduction under Section 80CCD(2): Employer`s contribution to NPS
Under Section 80CCD (2), an employee may receive a discount from the employer's contribution to the employee's National Pension Scheme (NPS) account. This deduction will be limited to a maximum of 14% of base salary plus DA for a central government employee, and 10% of base salary for any other employee, subject to the combined upper limit of rupees. . 7,50,000 that applies with respect to the employer contribution per year in the NPS, superannuation fund and the recognized provident fund. Also, interest, dividends, etc. accrued from the excess contribution will also be taxable. one way of saving tax without investment is this also.
The discount under Section 80CCD(2) is in addition to the discount available under Section 80C, where the total limit is Rs 1.5 lakh and 80 CCD(1B)which is Rs 50,000. In addition, this discount can also be used by the person who chooses the new concessional tax regime.
House rent Allowance or deduction for rent paid
The House Rent Allowance (HRA) is a common component of the salary structure. Employees who stay with the rent can take advantage of the HRA deduction based on the actual rent they pay. Regarding the Human Resources Law, article 10 (13A) provides for the exemption of at least the following amounts:
(i) 40 percent / 50 percent (in the case of megacities) of the salary amount;
(ii) The actual amount received as HRA;
(iii) The amount of rent that exceeds 10 percent of salary.
The employee/taxpayer will need to provide the necessary rent receipts/agreements and other details to the employer to allow the employer to calculate the exemption amount. Even if the employer does not receive the rent receipts, the employee can claim the tax benefits at the time the ITR is filed.
With respect to taxpayers who do not receive an HRA, Section 80GG establishes a deduction with respect to the rent paid. It should be noted that the benefits of this section are available subject to certain conditions. The taxpayer claiming this deduction or his spouse or minor child should not own any residential house property at the place where he ordinarily resides for performing his duty or the taxpayer himself should not own any other house or property which he is claiming as self-occupied for the purpose of calculating income from house property. Section 80GG establishes a deduction of at least the following amounts:
(I) A sum of Rs 5,000 per month, that is, Rs 60,000 per year;
(Ii) Actual rent paid in excess of 10 percent of gross income;
(3) 25 percent of total income.
In the above calculation, the total income will include the total income obtained after considering all deductions under Chapter VI A other than under this section. To save tax without investment and claim the deduction under Section 80GG, the taxpayer must file a return on Form 10BA.
Employee`s Provident Fund (EPF)
Employees' contribution to the recognized provident fund, which is deducted from their salaries on a monthly basis, is allowed as a deduction with a total limit of Rs 1.5 lakh under Section 80c. This way one can save tax without investment.
Standard deduction on salary
A standard deduction of up to Rs 50,000 is available for all salaried employees. The employer considers this deduction when calculating each employee's tax liability and deducting TDS from salary, discount must be claimed on the ITR form at the time the ITR is submitted. When planning taxes for the 2020-2021 tax year, the standard deduction should also be considered to calculate the total tax liability if the inherited tax system is chosen. This is also a good way to save tax without investment.
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