The deadline for filing income tax returns for the fiscal year 2020-21 has been extended to September 30 from July 31. You may use this two-month time to better plan your taxes. Under the Income Tax Act of 1961, there is a slew of legal ways to save money. These include tax-advantaged mutual funds, NPS, insurance premiums, medical insurance, and a variety of other things. In this article, we will go through some of the key tax deductions available under the Income Tax Act:
Health Insurance Premiums
Section 80D allows for a deduction of up to Rs 25,000 for health insurance premiums. This is in addition to the deductions stated above. This ceiling has been raised to Rs 50,000 for older citizens. A person who contributes to health insurance for himself and his senior citizen parents can claim a combined deduction of up to Rs 75,000 per year.
Take advantage of a rent reduction
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If you get HRA, you may be able to claim a tax deduction for it. There is no top limit, however, there are regulations that limit the maximum HRA deduction. If you do not receive HRA but pay rent, you can deduct up to Rs 60,000 per year under Section 80GG.
Get a tax reduction on your home loan interest
If you have a house loan, the interest paid on it is tax-deductible up to Rs 2 lakh per year under Section 24 of the Income Tax Act. There is no upper limit if you rent out your home. The total loss that can be claimed on the larger head of income from home property, however, is limited to Rs 2 lakh.
Put some money down in a savings account.
Individuals can certainly claim this as the simplest deduction under the Income Tax Act. Section 80TTA exempts interest on savings accounts up to Rs 10,000 per year. The maximum for elderly persons is Rs 50,000 for combined FD and savings account interest under Section 80TTB.
Make a contribution to the National Pension System.
This deduction under Section 80CCD(1B) is only applicable for NPS contributions up to Rs 50,000. The NPS allows you to establish a retirement corpus by investing in equities and debt pension funds. You can withdraw it when you reach the age of 60.
All of these points will significantly lower your overall taxable income for a given fiscal year, as well as provide you with a better understanding of the different government-mandated regulations.
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