Who doesn’t want to stop paying income tax? Well, you can avoid paying income tax but you can save income tax in India. And, here I am with the guide on how to save Income Tax in India without investment.
There are a lot of tax-saving investments under section 80C of Income TAX aCT 1961. But the real question is how to save income tax in India without Investment? It’s possible that you don’t want to invest anything or maybe you have already invested and now you just want to avoid taxation. I am not helping you with tax evasion but this is tax planning.
So, you plan your income in such a way that you end up paying minimum taxes to the Government. And here are 8 simple ways of doing that. I have covered questions like how to save income tax in India? How to save income tax on salary? How to save income tax in India on salary?
well, if you are a professional or businessman then it’s easy for you to save income tax. But its quite difficult for salaried people. So, here is the guide on how to save income tax on salary in India without Investment?
But, if you are worried about how to make money then heer are 50 Powerful Ways to Make Money Online in 2019.
How to Save Income Tax in India?
You can avoid paying a single rupee as tax if your earnings are below Rs 5 lakh in the previous year. And, the previous year is not the same as your Assessment year. Assessment year is the year in which you are filing your return and previous year is the year for which you are filing the return. Let’s see the options that will make your tax as nil for income up to Rs 5 Lakhs.
1. Saving on Rent – HRA u/s 10(13A)
HRA stands for House Rent Allowance and this is a part of your salary. If you are not aware of it then do check your salary slip and you will see this component. Now, what is the amount that you can save on HRA? So, the exemption from income tax for HRA under section 10(13A) is the minimum of these three components:
- Actual HRA Received
- 50%(metro cities like Mumbai Delhi, Chennai etc) of Basic Salary or 40%(non-metro cities) of Basic Salary
- Rent less 10% of basic salary
Now, whichever amount is the minimum will be allowed as exemption from your salary income. Law is different for different cities because of the cost of living factor. If you are not living in a rented house then here is a bonus tip. Make sure that you are not the owner of the house you are living in. And, if it’s your parent’s house then pay them a monthly rent via bank and take it as exemption from your income. You can also arrange for a rental agreement to show it as proof.
HRA Deduction under section 80GG
This is another deduction for the same reason but it is not for the salaried people. So, if you are a professional or businessman then you can also claim HRA deduction under section 80GG. The deduction amount is the least of the following:
- Rent less 10% of Income
- 25% of Income
- Rs 5000
So, the maximum standard deduction is Rs 5,000 that you can get.
Let us suppose that your Salary is Rs 20,000 per month and part of it is HRA as Rs 5000 and Rent paid is Rs 6000 per month. So, your total salary for the year would be Rs 240,000 and HRA Rs 60,000 and Rs 72,000 as Rent. So, the maximum amount allowed as HRA Exemption would be the least of Rs 60,000, Rs 120,000 as 50% of salary for metro-city or Rs 48,000 (72000 – 24000). The minimum of all the three amounts is Rs 48,000 so the exemption should be Rs 48,000. This is how to save income tax in India on salary as HRA.
2. Save Income Tax with EPF – Section 80C
EPF is Employee’s Provident Fund and its a form of investment but you don’t have to invest any amount here. Its an amount that you are already investing and you can claim deduction on it. Your employer is already taking a portion of your salary as EPF and investing it. Generally, it’s 12% of your basic salary. But, if you are a Government employee then it’s 12% of your basic salary plus DA.
One thing that you should remember is that it falls under section 80C. And, section 80C includes a lot of other investments too. The total limit for section 80C is Rs 150,000. So, here again, you can claim it as a deduction from your taxable salary income without investing anything.
3. Tuition Fees of Children u/s 80C
This is another component from which you can save income tax on. If you have children only then it applies to you and to the maximum of 2 children only. But, the good thing is that two of the parents can separately claim this deduction. And, this is also under section 80C.
It is for the full-time courses only and for children. You cannot spend on your education and claim a deduction. The deduction can be claimed for playschool, school or college. And, remember you don’t have to do anything additionally because you are already going to pay for the education of your child.
Let’s suppose you are paying Rs 1200 per month as Tuition fees for your child. Then the total amount that you can claim will be Rs 14,400 for the year. This is how to save income tax in India by paying tuition fees of your children.
4. Stamp Duty and Registration Charges u/s 80C
If you buy any property then you must be familiar with these terms. While buying any property its necessary to get it registered on your name and if you do that then you will have to pay Stamp Duty too. But, the good thing is that you are ultimately paying this stamp duty to the Government and they are giving you a deduction for that.
The stamp duty is about 7% currently and they have their own stamp duty value to calculate the duty. But, let’s make it simple and consider a property of Rs 30 lakhs on which the stamp duty shall be Rs 210,000. But, remember that this deduction also falls under section 80C whose overall limit is Rs 150,000. So, you can claim only Rs 150,000 as deduction u/s 80C. This is howe to save income tax without investment and simply buying property.
But, you will not buy any property just to claim deductions. It’s only for you if you have purchased any property and paid stamp duty in the previous year.
5. Home Loan u/s 80C & 24
I am pretty sure that it is a lifetime decision for middle-class people to buy a home. And, when you pay stamp duty to get it registered you can claim the above deduction. But, you are going to pay an EMI for the next 10 or 15 years. And, the good thing is that you get a deduction on home loan too.
Now, you can argue that you didn’t buy a flat with a loan but paid the whole amount at a time. So, this is not for you. But if you are looking for how to save income tax then the home loan is a pretty good option. But, what is the amount that you can save with home loan?
Firstly, it is the principal amount that you are paying on your home loan and it is covered u/s 801C. So, you fall under that limit of Rs 150,000 again. But, you also get a deduction on interest too under section 24. This is for self-occupied property only and limited to Rs 200,000.
One thing you should keep in mind that if you are claiming a home loan then you can claim HRA because you are not paying any rent. However, if you are paying rent and let out your own property then you can claim both. But, your income from let out property shall also be considered.
6. Interest on Education Loan u/s 80E
Now, you must have heard about saving income tax on education loans but how to save income tax on education loans exactly? Firstly, this deduction is only for the interest portion of your education loan. If you are repaying any loan for the higher education of yourself, your spouse or children. Yes, it is applicable for you your husband or wife and your child too. But remember that it is for higher education only which you do after passing 12th standard.
There is no limit on the amount but it is limited to a maximum of 8 years only. You can do your education in India or abroad and still you can claim a deduction. And, you do not make any extra investment here.
7. Donations u/s 80G
We all love to help others who need it and if you are doing it by making some donations then you can claim a deduction on it. Yes, Government is not asking you to pay income tax on the amount that you have donated. But, you should make donations to certain funds only. The government lays down a few funds where you can donate like the Prime Minister’s Relief Funds etc.
And, the donation should not be more than 10% of your income. There is also a limit on how many deductions you can claim because the law wants to promote a certain type of donations. You can get a 100% or 50% deduction depending upon the donation you make. I am not asking you to make any extra investment but you can make some donations.
8. Medical Treatment
Medical treatment is getting very costly nowadays especially if you have a certain disease or someone who is disabled. But, the good thing is that you can claim a deduction for any medical treatment for the disability.
Deduction u/s 80DD
This section covers the expenses on the medical treatment of a dependant who is disabled. If someone is disabled and he/she is dependent on you then you can claim deduction straight away. If the disability is above 40% then the deduction is of Rs 75,000. But, if the disability is very serious and it is above 80% then the deduction is of Rs 125,000.
Deduction u/s 80U
If the taxpayer himself is disabled then he/she can claim deduction u/s 80U. And, the deduction amount is the same. If the disability is above 40% then the deduction is of Rs 75,000. But, if the disability is very serious and it is above 80% then the deduction is of Rs 125,000.
There are certain diseases that are very expensive to get cured. So, you can claim a deduction on an actual expense that you make for yourself or a dependent. It is limited to Rs 40,000 only and Rs 60,000 for senior citizens. But, remember that it’s on actual expense only.
Conclusion on How to Save income tax?
Now you know how to save income tax in India without making any extra investment. You are not making any extra investment but practically saving a lot of taxes. These are simple 8 ways to save income tax in India. And, remember, it is just tax planning that you are doing. It is allowed by the law itself.
Let me help you understand this with an example. Let us suppose that you have a salary of Rs 70,000(30,000 basic) per month. You have a child whose tuition fees are Rs 20,000 for the year. The home loan is of Rs 240,000 of which only Rs 200,000 is the principal amount. Now, let us calculate the taxable income for you.
The first deduction that you will get is of EPF and I am taking 12% of the basic salary (30,000) here which amounts to Rs 43,200. And, then the principal on home loan being Rs 200,000 and tuition fees of Rs 20,000 is also deductible. So, the total deduction u/s 80C amounts to Rs 43200+200000+20000=263,200. But, remember the maximum limit being Rs 150,000 only for the section 80C. So, your taxable income will be Rs 70000*12=840,000-150,000=690,000.
This is how to save income tax in India without any investment. It’s simple you just have to follow some simple tips.
How do you save income tax in India?