How to save money? Here are the 10 ways to save your tax in FY 2023-24

If you are a salaried employee and want to save your money, here are the 10 ways to save your financial tax under Income Tax, 1961

Tax planning becomes a very critical thing when the financial year comes to an end. Salaried employees look for ways to save their hard-earned money as a famous old saying goes: a penny saved is a penny earned. This article is for you if you're also looking for ways to save your income tax. The Income Tax Act, 1961, offers multiple ways for individuals to claim deductions and exemptions in a particular financial year. 

The amount of tax majorly depends on two factors, i.e., the tax regime chosen and the expenses or the investments made by the individual for claiming the deductions. In a recent interim budget 2024, the government didn't change the income tax slabs for FY 2024-25 (April 1 2024 - March 31, 2025).

The new tax regime is the default tax regime and an individual salaried individual has to opt specifically for the old tax regime.

Top 10 tips to save your tax money

Here are the 10 ways to save your tax:

House Rent Allowance (HRA)

One of the best ways to save your income tax is through House Rent Allowance. The benefit of HRA is only available for the old tax regime who are paying rent in a house and also get an HRA component as part of the salary structure. He can claim tax exemption on HRA. If an individual doesn't get HRA as part of his or her salary, then he/she can claim deductions on HRA after a specified calculation with the maximum limit of Rs 60,000 as annual rent.

Leave Travel Allowance (LTA)

An employee can claim reimbursement through Leave Travel Allowance (LTA) in connection with himself and his family, (spouse, children, parents, brothers and sisters) who are wholly dependent on the employee and travelling on leave to any place in India. The Income Tax Act has defined the parameters to follow and get the amount which can be claimed as a deduction for LTA.

Deduction for home loan interest

If an individual has taken a home loan then a deduction for interest paid on such loan can be claimed under section 24 (b). In a financial year, the maximum amount that an individual can claim home loan interest is Rs 2 lakh. Under section 24 (b), the deduction is available for the home loan's interest component and for the principal amount the deduction is up to Rs 1.5 lakh under section 80C is available. 

Standard Deduction

Whether you have opted for a new tax regime or an old tax regime, you can claim a standard deduction of flat Rs 50,000 from the total income. The Standard Deduction has replaced the conveyance allowance and medical allowance. 

READ: Use ITR 2 or 3? Be prepared to make more disclosures while filing return
 

Buy Government Schemes

Another way to save your income from tax is through investing in numerous government-mandated schemes offering high returns on total investments along with tax waivers. Under section 80C of the Income Tax Act, 1961, an individual can claim up to Rs 1.5 lakh of tax waivers through investing in such government investment schemes.

Medical Insurance

A salaried employee can claim a deduction under section 80D against medical insurance. The medical insurance should cover his spouse, dependent children or parents. An individual can claim a deduction of up to Rs 25,000 for paying insurance premiums towards the house and dependent children. You can also claim an additional deduction of Rs 25,000 against the premium paid towards the life of your parents. In case, your parents are senior citizens, then you can claim the deduction of Rs 50,000 instead or Rs 25,000.

Shares and Mutual Funds

Individuals can reduce their income tax if they invest in shares and mutual funds. Under section 80CCG of the Income Tax Act, 1961, citizens who earn below Rs 12 lakh can get additional deductions if they invest money in shares or certain companies and some specified mutual funds. These deductions are offered under Rajiv Gandhi Equity Savings Schemes and it is worth knowing that it is available for first-time investors only.

Donations

Indian citizens can claim deductions by making contributions to the National Relief Funds, citizens can save money on tax by claiming deductions on the amount spent on donations. A taxpayer can claim up to 50 per cent deductions on the donated amount to the NGOs and 10 per cent of the adjusted total income. Under section 80G of the Income Tax, the taxpayer can claim a deduction only after receiving 80G certifications. He can also claim deductions on donations made towards political parties after meeting certain conditions under section 80GGC.

Education Loan

Another way to claim a deduction under section 80E against interest paid on an Education Loan. There is no maximum deduction limit under section 80E and the individual doesn't need to submit any documents or evidence for such a deduction. The deduction will be allowed for a maximum of 8 years.

Electric Vehicle Loan

You can also claim a deduction of up to Rs 1.5 lakh under section 80 EEB as interest paid on the electric vehicle loan. However, the loan must be sanctioned between April 1, 2019, and March 31, 2023.