Every salaried person or self-employed individual wants to save taxes. The good news is that there are multiple options for individual tax deduction under the Income Tax Act. Smart use of them will reduce your taxable income and legally pay less taxes.
Let’s examine available deductions and how individual tax deductions work.
An individual tax deduction is what?
Your taxable income is lower after an individual tax deduction. You will thus be taxed just on ₹8.5 lakh if you earn ₹10 lakh in a year and claim ₹1.5 lakh as deductions.
The Income Tax Act provides several areas where one may make these deductions.
Common Areas for Individual Tax Deductibility
Section 80C: Up to ₹1.5 lakh:
- Life insurance rates
- Provident Fund for Employees (EPF)
- PPF, or public provident fund
- Mutual funds with ELSS
- On a home loan, principal return
- Children’s educational costs
Section 80D: Health Insurance
- ₹25,000 for children, spouse, and self
- Further ₹25,000 for parents under 60
- ₹50,000 for parents sixty years of age and above
Section 24(b) — Home Loan Interest
- Up to ₹2 lakh deduction on home loan interest paid
- Only once the house is occupied personally
Section 10(13A) – HRA, House Rent Allowance
- Should you be renting a house and receive HRA from your company,
- Deductions grounded in real pay, rent, and city
Standard Deductible: ₹50,000
- Available to all pensioners and salaried people
- Not required any documentation
Section 80E: Education Loan Interest
- Complete interest amount can be claimed
- There is no upper limit
- For eight years only
Old regime: lets all above deductions
New regime: requires wise choice
- No individual tax deductions are permitted under the new tax system
- For your income level, you have to decide which one saves more taxes
Advice on Maximizing Individual Tax Deductibility
- Invest in PPF or ELSS before March 31
- Purchase parental health insurance
- Claim rent even if you share a house (along with rent receipts)
- Save documentation on all expenses and investments
Errors to Avoid
- Claiming without Evidence
- Selecting an inappropriate tax system
- Not annually reviewing deductions
- Ignorance of declaring deductions to your company
