How to save income tax –
a question often asked by my friends, family and blog readers. The problem is
that there are many clauses for people to know and if they have heard about
whether it applies to their case or not? To help both salaried and professional
plan their tax, we have come up with the “How to save tax for
2019-20” ebook. This is a short 43 slide PowerPoint presentation (in PDF)
covering all tax-saving classes and investments applicable to taxpayers.
Budget 2019: Changes in
Income Tax Rules
tax exemption U / S 87A: For persons with a taxable income of Rs 5 lakh or
less, tax exemption will be reduced or Rs 12,500 whichever is less.
standard deduction for salaried and pensioners increased from Rs 40,000 to Rs
tax for the super-rich: surcharge increased by 25% for income between 2 to 5
crores and up to 37% for income above 5 crores
tax deduction of Rs 1.5 lakh on a home loan on the purchase of an affordable
tax deduction of Rs 1.5 lakh on an auto loan for the purchase of electric
on National Rental Income from Second House
gains exemption on reinvestment in two house properties: Taxpayers can now buy
two houses on the sale of 1 house if the capital gain is less than Rs 2 crore.
This benefit can be availed only once in a lifetime
limit on bank interest income increased from Rs 10,000 to Rs 40,000
I am often asked, citing
1. There is no tax
benefit on infrastructure bonds
2. There is no separate tax slab for men and women.
1. Section 80C / 80CCC / 80CCD
These 3 are the most popular
section to save tax and there are many options to save tax. The maximum
exemption including all the above classes is Rs 1.5 lakh. The 80CCC deals with
pension products, while the 80CCD includes the Central Government Employees
You can choose from the following
for tax saving investment:
Employee / Voluntary Provident
Fund (EPF / VPF)
• PPF (Public Provident Fund)
• Sukanya Samriddhi Account
• National Savings Certificate
• Senior Citizen Savings Scheme
• 5 years tax-saving fixed
deposits in banks/post offices
• Life insurance premium
• Life insurance or mutual fund
• Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Fund)
• Central Government Employees Pension Scheme
• Major Payments on Home Loans
• Stamp duty and house registration
• The tuition fee for 2 children
• We have done a comprehensive
analysis of all the above available options and you can choose which is best
2. Section 80 CCD (1B) – Investment in NPS
Budget 2015 has allowed an
additional exemption of Rs 50,000 for investment in NPS. This has also been
continued this year. We have done a complete analysis that you can read by
clicking on the link given below.
3. Payment of interest on home loan (Section 24)
Up to Rs 2 lakh interest is given
on home loan for a self-occupied or rented house, which is exempted from U / S
24. Earlier there was no limit on interest deduction on rented property. Budget
2017 has changed this and now the tax exemption limit for interest paid on a
home loan is Rs 2 lakh, despite it being self-occupied or rented. However, the
loss of more than Rs 2 lakh for rented houses can be carried forward for up to
4. Payment of interest on education loan (Section 80E)
Entire interest (without any
upper limit) paid on an education loan in a financial year is eligible for
deduction. However, no deduction in principal has been made for education
The loan should be for the
education of self, spouse or children only and should be taken for a full-time
course only. The loan will have to be taken from an approved charitable trust
or financial institution.
This deduction applies for the
year you start paying your interest and seven more years immediately after the
initial year. So in all, you can claim education loan deduction for a maximum
period of eight years.
5. Medical Insurance for Self and Parent (Section 80D)
80D qualified for deduction of
premium paid for medical / health insurance for self, spouse, children, and
parents. If you are under 60 years of age and under 60 years of age above Rs
50,000 you can claim a maximum deduction of Rs 25,000.
An additional deduction of Rs
25,000 can be claimed to buy health insurance for your parents (Rs 50,000 in
case the parents are senior citizens). This deduction can be claimed whether
the parents are dependent on you. However, this benefit is not available for
in-laws to purchase health insurance.
HUFs can claim this deduction for
the premium paid to ensure the health of any member.
The premium must be paid in any
mode other than cash to avail of the deduction. A deduction of Rs 5,000 was
introduced in Budget 2013 (with a limit of Rs 25,000 / 30,000) Preventive
health screening is also allowed for self, spouse, dependent children, and
parents. The series continued this year also.
6. Treatment of critical illness (Section 80DDB)
Income tax is deducted on the expenses
incurred for the treatment of some diseases for self and dependents. The
deduction amount for senior citizens is up to Rs 1,00,000; While for all others
Rs 40,000. Dependents may be parents, spouses, children or siblings. They
should be completely dependent on you.
To claim tax exemption, you need
a certificate from a specialist in a government hospital as proof of illness
and treatment. If the expenses have been reimbursed by the insurance companies
or your employer, this deduction cannot be claimed. In the case of partial
reimbursement, the remaining amount can be claimed as a deduction.
Chronic renal failure
7. A physically handicapped taxpayer (Section 80U)
The taxpayer can claim a
deduction if he is suffering from certain disabilities or diseases, he can
deduct 80U. In case of general disability (40% or more disability) the
deduction is Rs 75,000 and for severe disability (80% or more disability) Rs
A certificate from a neurologist
or civil surgeon or chief medical officer of a government hospital will be
required as proof of illness.