ITR 2024: As deadline nears, here's a look at income tax-saving hacks under old and new tax regimes

Tax planning is a great way to save on taxes and boost income. To help in this direction, the Income Tax Department has provisions for deductions for investments, savings, and expenditures made in a calendar year. The government provides income tax exemptions on the total income to ease the pressure on the common man.

In this article, we’ll discuss ways to save taxes under both the new and old tax regimes:

Tax saving deductions and exemptions in the new tax regime

As per the new tax regime, there are limited tax deductions for taxpayers. Hence, the new regime is suitable for those who have limited investments. The tax slab rates in this new regime are lower than the old regime.

The tax slabs under the new tax regime are:

Deductions under the new tax regime

The following are the deductions under the new tax regime:

Employer Contribution to NPS u/s 80CCD(2)

Section 80CCD(2) of the Income Tax Act allows tax deduction for the employers’ contribution to the NPS. Only salaried individuals are eligible for this deduction and not self-employed. The employer can contribute to NPS even after already contributing to PPF and EPF. The employer’s contribution can be equal/more than the employee’s.

Central government employees can claim a deduction of up to 14% of their salary (Basic + DA) for employer NPS contributions.

Non-government employees can claim a deduction of up to 10% of their salary (Basic + DA) for employer NPS contributions.

Employer contributions are deducted from the employee's payslip and deposited into the NPS account.

The overall limit for employer contributions to PF, NPS, and Superannuation is ₹750,000.

Contribution to Agniveer Corpus Fund under Section 80 CCH(2)

Under Section 80 CCH(2) of the Income Tax Act, contributions to the Agniveer Corpus Fund are eligible for deduction. Soldiers in the scheme get benefits like ration, travel and risk allowances as well as death and disability compensation. This deduction is available in both tax regimes.

Deduction Under Section 57(iiA)

Under Section 57(iiA) for family pension, a deduction of the lower of ₹15,000 or one-third of the pension received by the employee is allowed.

Interest on home loans on let-out property under Section 24

As per the new tax regime, interest paid on a home loan for a self-occupied property is not allowed as a deduction under section 24. However, interest on a home loan for a let-out property is deductible without any upper limit.

Conveyance allowance

Conveyance allowance is given to cover expenses during the performance of organisational work. From FY 2018-19 onwards, a monthly exemption of ₹3,200 is allowed. This applies specifically to physically challenged employees travelling from their homes to their workplaces.

Exemptions under Section 10 for the new tax regime

Exemptions under Section 10 were not permitted in the new tax regime earlier. However, certain exemptions are now eligible.

Employers offer a voluntary retirement scheme and the exempted amount is ₹5 lakh. Gratuity received by government employees is also fully exempted. For private employees, it depends on whether they are covered under the Payment of Gratuity Act.

On leave encashments (when employees encash their paid leaves at the time of retirement), the maximum amount exempted is increased to ₹25 lakhs. Anything more than this amount will be taxable.

Tax saving deductions and exemptions in the old tax regime

The old regime offers taxpayers the advantage of a reduced tax liability. Here are the tax slabs under the old tax regime:

The following are the tax deductions under the old tax regime:

• Tax benefits on home loans under the old tax regime

Under the old tax regime, Sections 80C and 24(b) reduce monetary liability through lower tax burdens. Under this old regime, a home buyer gets tax benefits in two ways.

One can claim a deduction of up to ₹1.5 lakh per year on the amount repaid towards the loan principal under Section 80C.

There is also tax exemption on the interest paid on the home loan of up to Rs ₹2 lakh per year under Section 24(b).

First-time home buyers can claim additional deductions under Section 80 EEA, as per the old tax regime.

• Buying a health insurance policy to claim tax deductions

Under Section 80D, people can claim tax deductions for their annual package on premiums paid. Details are given below:

Investing in government schemes

Individuals can claim tax rebates of up to ₹1.5 lakh on investments made in government schemes under Section 80C of the Income Tax Act.

The government schemes you can invest in include:

• Senior Citizen Savings Scheme (SCSS)
• Sukanya Samriddhi Yojana (SSY)
• National Pension Scheme (NPS)
• Public Provident Fund (PPF)
• National Pension Scheme (NPS)

Buying insurance policies

For the insurance bought after April 1, 2012, one can claim tax benefits of up to ₹1.5 lakh on annual premiums under Section 80C. However, it has to be lower than 10% of the sum assured. For policies bought before April 1, 2012, total premiums should not exceed 20% of the sum assured.

The Finance Act 2021 states that for Unit Linked Insurance Plan (ULIP), exemption under Section 10(10D) is applicable when the premium is less than ₹2.5 lakh per year. As per the Finance Act 2023, the premium should be less than ₹5 lakh per annum.

One can also enjoy tax exemptions up to ₹1.5 lakh under Section 80CCC on the renewal of life insurance coverage and annuity plans made monthly through salaries.

Investment options that come under Section 80C

Following are the investment opportunities to avail tax rebates under Section 80C up to ₹1.5 lakh in a year: Some of the eligible investment avenues under Section 80C include:

• 5-Year Bank Fixed Deposit
• Public Provident Fund (PPF)
• National Savings Certificate
• National Pension System (NPS)
• ELSS Funds
• Unit Linked Insurance Plan (ULIP)
• Sukanya Samriddhi Yojana (SSY)
• Senior Citizen Saving Scheme (SCSS)

Other tax-saving options apart from Section 80C are:

Apart from Section 80C, there are exemptions under Section 80 to save on income tax. These include the tax benefits on health insurance premiums and home loan interest rates.

• Under Section 24, home loan interest can be claimed as a deduction up to ₹2 lakh.

• Charities made to institutions can be claimed as a deduction under Section 80G.

• Education loan interests can be claimed as a deduction under Section 80E.

• Employer contributions to NPS can be claimed as deductions under Section 80CCD(2) with an upper limit of ₹75,000.

• Individual contributions to NPS are also eligible for deductions under Section 80CCD (1B) with a threshold of ₹50,000.

• Section 80GG allows non-salaried individuals to claim a deduction of up to ₹60,000 per year for the rent paid on accommodation.

• Section 80TTA allows a deduction of up to ₹10,000 on savings bank interest for individuals under 60 years. For senior citizens, Section 80 TTB provides deductions of up to ₹50,000 on all interest incomes.

As a general rule, it is best if one starts investing in the first quarter and spreads the investments over the year. It would significantly reduce the burden at the year-end and also allow us to make prudent decisions.