As per the data, more than 2 crore taxpayers in the age group of 18 to 35 years filed their Income Tax Returns (ITRs) in FY 2022-23.
In the Budget 2023, the Central Government announced that annual income of up to Rs. 7 lakhs would be tax-free under the New Tax Regime. This is along with the standard deduction of Rs. 50,000/- under the New Regime, which will make income up to Rs. 7.5 lakh tax-free for salaried persons.
But, if you look at the old tax regime, though income up to Rs. 5 lakhs is exempt from tax, you can claim various deductions to save tax.
So, let us discuss these major deductions available under the old tax regime that can help you save taxes by reducing your tax liability.
Section 80C:
Under this section, taxpayers are eligible for a deduction of up to Rs. 1.5 lakhs for investments made in various instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS), and others.
Section 80D:
This section allows taxpayers to claim a deduction of up to Rs. 25,000 for medical insurance premiums paid for themselves, their spouses, and dependent children. An additional deduction of up to Rs. 25,000 is also available for premiums paid to parents. And in the case of senior citizens, the deduction limit is Rs. 50,000.
Section 80E:
Taxpayers are allowed to claim a deduction on the interest paid on education loans for higher studies, taken for themselves, their spouse, children, or for a student for whom they are legal guardians.
Section 24b:
According to this section, if an individual has taken a loan to purchase or construct a house property, he/she can claim a deduction for the interest paid on that loan. The maximum amount of deduction allowed under this section is Rs. 2,00,000 per financial year, regardless of the actual amount of interest paid on the loan. However, the deduction is subject to certain conditions, such as the completion of construction or acquisition of the property within a specified time period, and the use of the property for self-occupation or rental purposes.
Additionally, if the property is let out, the entire amount of interest paid on the loan can be claimed as a deduction, without any limit.
HRA:
House Rent Allowance (HRA) is a component of the salary package provided by the employer to the employee to meet the expenses of rent paid for the accommodation. HRA is generally taxable as a part of the employee’s income, but the Income Tax Act in India provides for certain deductions under Section 10(13A) for HRA received by salaried individuals.
The deduction allowed for HRA under the Income Tax Act is calculated as the minimum of the following three amounts:
- Actual HRA received from the employer
- Rent paid minus 10% of salary
- 50% of the salary, if the employee lives in a metro city (Delhi, Mumbai, Kolkata, or Chennai) or 40% of the salary if the employee lives in a non-metro city.
Here, “salary” refers to basic salary, dearness allowance (if it is part of the salary), and commission based on a fixed percentage of turnover achieved by the employee. It’s important to note that to claim the deduction for HRA, the employee must be staying in rented accommodation and paying rent for it.
Conclusion
These are just a few of the tax deductions available under the old tax regime. There are many other sections under which taxpayers could claim deductions and hence it is important to plan your taxes in advance in order to determine your tax liability and choose the right tax regime for your portfolio.
Find the complete list of such deductions by visiting our knowledge section on www.fintoo.in.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
