You can save tax in India by below ways.
- Rent - (from 20k - 2lac)
- Housing Loan Interest - upto 1.5 lac
- Chapter VIA - (Section 80C/80CCC/80CCD(1) - upto 1.2 lac
Popular options to save tax are
- Rent (If you are staying on rent) - Total amount of rent paid during financial year.
- Housing Loan Interest - Interest paid during the financial year.
- Chapter VIA - This includes life insurance policies, Home Loan Principal, Stamp duty and registration.
Example -
Suppose your annual salary is 10 lacs. Let us calculate your tax liability.
Tax Exempted Income under section 10 and 17.
Some part of your income is exempted from tax like House Rent Allowance, Conveyance Allowance, Medical Allowance. So let us assume that 80k is tax exempted income.
So your taxable income is 9.2 lacs.
Suppose you did not utilise the tax saving options at all, your total tax will be 1.09 lacs.
25k(10% slab) + 84k(20% slab) = 1.09 lacs
Now let us try to save this tax using below options.
Suppose your annual salary is 10 lacs. Let us calculate your tax liability.
Tax Exempted Income under section 10 and 17.
Some part of your income is exempted from tax like House Rent Allowance, Conveyance Allowance, Medical Allowance. So let us assume that 80k is tax exempted income.
So your taxable income is 9.2 lacs.
Suppose you did not utilise the tax saving options at all, your total tax will be 1.09 lacs.
25k(10% slab) + 84k(20% slab) = 1.09 lacs
Now let us try to save this tax using below options.
- Suppose you claim for the Rent amounting to Rs. 96k.(If you are not staying on rent and have a housing loan, you can claim tax benefit on interest amount upto 1.5 lacs)
- Suppose you saved 1.5 lacs using Chapter VIA.
Total taxable income will be 9.2 - (.96 + 1.5) = 6.74 lacs
Your tax liability will be 25k(10% slab)+34.8k(20% slab) = 59.8k.
So in this case, we saved almost Rs. 50k by utilising the proper tax saving options.
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