It is that time of the year! I have already computed my Income for the financial year, the tax I need to pay, how much to save and what documents I need to give. To make things easier, I have made a cheat sheet of all the possible ways for you. Go through this list to see where are you can save tax. This is not tax evasion, this is tax planning. So don’t be shy, a rupee you save as tax is a rupee you earn!
I am not giving gyaan or going to give much details, this is a cheat sheet and will simply only list out the options. Check which ones can suit you, research and apply them accordingly
Tax slab for Financial Year 2019 to 2020
|Income Slab||Tax & Cess (for those under 60 years of age)|
|Rs. 0 to Rs. 2.5 Lakhs||Nil|
|Rs. 2.5 lakhs to Rs. 5 Lakhs||(total income-Rs.2.5 lakhs) * 5% + (4% of tax as cess)|
|Rs. 5 Lakhs to Rs. 10 Lakhs||Rs.12,500 + (total income-Rs.5 lakhs) * 20% + (4% of tax as cess)|
|Rs. 10 Lakhs and above||Rs.1,12,500 + (total income-Rs.10 lakhs) * 30% + (4% of tax as cess)|
This is only covers the slab for salaried under 60 non-crorepathis. If you need more details and help, check here
80C the hell out of your Income
There is a total exemption of Rs.1,50,000 given to you under section 80C. Ensure you have got all of it. Here are the things that fall under 80C:
- Public Provident Fund (this is the PF element that is taken from your salary)
- Employee Provident Fund (EPF)
- ULIP investments
- Principal amount paid on Housing Loan
- 5 year Fixed Deposits
- Investments in Sukanya Samriddhi Yojna
- Equity Linked Savings Scheme
- Premium paid to LIC
- Tuition fees for children
- Stamp and Registration fees paid in the FY
- Investment in permissible Mutual Funds
- Long term deposits with Post office
My suggestion on handling 80C for those on FIRE
As you can see, a lot of options are available under section 80C. Focus on meeting the Rs.1,50,000 criteria alone. Anything above that is not tax free. As most of these vehicles provides 6% to 9% interest, there is no point in investing more than you need to in a 5 year FD that locks your money or a ULIP with exit barriers and crazy fluctuations.
Paying Rent? Section 10 gives you a tax break on it
- Section 10 of the IT act allows you to get a tax break on the rent you pay. This is capped at your HRA limit.
Section 80CCD (1B)
- Apart from 80C, section 80CCD (1B) allows you to get an additional Rs.50,000 as tax free for investments made in National Pension Scheme.
All the tax exemptions available for Medical expenses
Section 80D: Some good out of medical expenses
- 80D – Medical Insurance for Self, Spouse and Kids – Upto Rs.25,000
- 80D – Medical Insurance for Parents (Non Senior Citizens) – Upto Rs.25,000
- 80D – Medical Insurance for Parents (Senior Citizens) – Upto Rs.50,000
- 80D – Preventive Health Checkup Self, spouse and kids – Upto Rs.5,000
- 80D – Preventive Health Checkup Parents – Upto Rs.5,000
- 80DD – Medical Treatment / Insurance of handicapped Dependencies (75000 or 125000)
- 80DDB – Medical Treatment for Specified Diseases (40000 to 100000)
Several other options available
Still paying off your MBA loan? Get some tax break on it
- Section 80E – Interest on loan of higher education
For the kind hearts who donated to charity
- Sec 80G – Anywhere between 50% to 100% of the donated amount can be tax free
For those who donated to Political parties to put up more banners L
- Sec 80 GGB and 80 GGC – 100% tax free on all non-cash contributions made
For the Einsteins and A.R.Rahmans who earn Royalty or Patent
- Sec 80RRB – You can get a tax break of upto Rs. 3,00,000 for all royalty and patent income
Interest earned from Savings
- Section 80TTA – Interest on Saving a/c (upto Rs.40,000). Most banks give you this certificate on their online banking portals.
Are you specially abled?
- Section 80U – Permanent Physical Disability (between 75000 or 125000)
Here is something to ease expenses owning a property
Apart from the deduction on Principal paid on home loan under Section 80C, there are a few more available.
- Sec 24 – Income/Loss From House Property (upto Rs.2,00,000) – This is the interest you pay on your home loan
- Sec 80EE(For home loans taken in FY 16-17) (upto Rs.50,000) – Special deduction for those who bought their first home taking the loan in this period
- Sec 80EEA(for home loans taken in FY 19-20) (upto Rs.1,50,000) – Special deductions for the lucky guys who took a loan in this time period
There is some more! Here are more ways to save your tax
Use a Food pass such as Sodexo or Meal pass to save tax:
- If your company permits this, you will be able to get a break of as much as Rs.24,000 per year tax free
Tax break on Telephone and Internet charges
- This again depends on your employer. If they provide this as a benefit, you will be getting as much as Rs.30,000 tax free per year
Company Lease Vehicle
- My favourite. If your company allows this, go for it! You can get a tax break of upto Rs.5,00,000 per year. (Read how I got my car for free via CLV)
Tax on Business travel – Fuel and Car maintenance allowance
- If your job is of a nature where you need to travel and your employer allows this, you can get as much as Rs.1,00,000 as tax savings under this category
Tax deductions for Driver’s Allowance
- If you are of a senior management position and your company allows this, you could get an additional Rs.1,20,000 tax free for the salary you pay to your driver
Tax planning vs Tax evasion:
Planning and using the options given to you is simply smart tax planning. You don’t have to be scared about it or feel shy in utilizing the options you have. Tax evasion is when you willfully hide or negligently fail to report and ultimately pay the tax due to the government.
The benefits and sections mentioned above are legal and provided to us by the government for taking positive actions, such as saving, buying a house or supporting a family member.
On the other hand, please be a responsible citizen. Please pay your tax where it is due, it is this money that ultimately moves our nation forward (talks on irresponsible politicians and authority squandering your money is another issue for another day). You do your part for the country.
Once you are done with all computations, you can use Clear Tax like me to submit, track and get your tax refunds easily. It takes 5 minutes with these guys!