The government, in the
2019 interim budget, has increased the rebate limit under section 87A to Rs 12,500 from Rs 2,500 for individuals having taxable income not exceeding Rs 5 lakh.
The individual has to plan investments and park money in different tax saving avenues for the financial year (FY) 2019-20 and avail deductions to reduce his taxable income to Rs 5 lakh.
If an individual calculates his taxes early in the FY, he can invest his earnings in the most tax-friendly ways and reduce taxes to zero. With the changes proposed in the budget 2019 on the personal tax front, an individual with a gross total income up to Rs 9.50 lakh can now reduce his tax liability to NIL.
Here is how: Exhaust 80C Limit
Perhaps the first and the best way to save on taxes is to exhaust the section 80C tax benefit. Several investments and expenses are eligible under section 80C. You can invest up to Rs 1.5 lakh under the section 80C tax saving options like PPF ( public provident fund), NPS (national pension scheme), EPF (employee provident fund) (deducted from your salary), life insurance premium, tax-saving mutual funds (ELSS).
Expenses such as children’s tuition fees and housing loan principal repaid among others are also eligible for the claim. These investments/expenses can reduce your taxable earnings to Rs 8 lakh.
Claim Interest On Home Loan
Becoming a homeowner is a great feeling. You have taken a huge stride in securing your financial future. You can claim deduction up to Rs 2 lakh for the interest component of your EMIs. If you have an ongoing home loan - you can claim its interest portion. This can bring down the total taxable income to Rs 6 lakh.
Additional Tax Benefit For NPS Contributors
NPS comes with twin benefits of saving for retirement and claiming tax benefits on deposits made. By investing an additional Rs 50,000 in NPS, you can claim a deduction under section 80CCD (1B).
Standard Deduction For Every Salaried Person
If you are a salaried individual, you can reduce your total income by Rs 50,000 through standard deduction. The limit of standard deduction has been recently raised in the budget to Rs 50,000 from Rs 40,000.
Reduce Medical Expenditures And Tax In One Go With Health Insurance
In this time and age, adequate health insurance for you and your family is a must. A deduction of Rs 25,000 on the premium paid on it is only one of the many perks. It is applicable to the insurance taken for you, your spouse, dependent children and parents. In fact, there is an additional benefit of Rs 25,000 under section 80D for insurance taken for your parents. This deduction can be higher, if your parents are senior citizens. Insure your family and they can help you save your taxes.
Let’s assume that you have an interest income from a savings account of Rs 10,000 included in the gross total income of Rs 9.50 lakh. With the provisions of section 80TTA, this interest income can also be nullified by claiming a deduction of maximum Rs 10,000.
Interest Income Can Play A Role Too
After considering all the tax saving avenues mentioned above, you can reduce your taxable income and bring it under Rs 5 lakh and avail full tax rebate under section 87A.
Archit Gupta is founder and CEO of ClearTax.