Tax planning is an essential aspect of financial management, especially for individuals earning up to ₹1.5 lakh per annum. By utilizing various tax-saving options under the Income Tax Act, you can legally reduce your tax liability and maximize your savings. In this article, we’ll explore the best ways to save tax on an income of up to ₹1.5 lakh.
Understanding the Basic Tax Exemption
Before diving into tax-saving methods, it’s important to note that under the new tax regime, individuals earning up to ₹2.5 lakh per annum are already exempt from income tax. However, if your taxable income is above this limit, you can use various exemptions and deductions to reduce your tax liability.
Best Tax-Saving Options for Income Up to ₹1.5 Lakh
1. Utilize Section 80C – Maximum Deduction of ₹1.5 Lakh
The most effective way to save tax is by utilizing deductions under Section 80C of the Income Tax Act. You can claim a maximum deduction of ₹1.5 lakh by investing in the following instruments:
Public Provident Fund (PPF) – Tax-free returns with a lock-in period of 15 years.
Employees’ Provident Fund (EPF) – Contributions deducted from your salary are eligible for deduction.
Equity-Linked Savings Scheme (ELSS) – A market-linked investment option with tax-free returns after three years.
National Savings Certificate (NSC) – Offers fixed interest rates and is eligible for 80C deductions.
Life Insurance Premiums – Premiums paid for life insurance policies, including term plans, qualify for deductions.
Tax-Saving Fixed Deposits (FDs) – A five-year lock-in FD that offers tax benefits under 80C.
Sukanya Samriddhi Yojana (SSY) – A government-backed savings scheme for the girl child.
Tuition Fees – Fees paid for children’s education (up to two children) are eligible for deduction.
2. Claim Deductions Under Section 80D (Health Insurance)
You can save additional tax by claiming deductions under Section 80D for medical insurance premiums:
Self, spouse, and children – ₹25,000 deduction
Parents (below 60 years) – ₹25,000 additional deduction
Parents (above 60 years) – ₹50,000 deduction
3. Save Tax on Home Loans – Section 24(b) and 80EE
If you have taken a home loan, you can claim:
Up to ₹2 lakh deduction on home loan interest under Section 24(b).
Additional deduction of ₹50,000 under Section 80EE (if applicable).
4. Invest in the National Pension System (NPS) – Section 80CCD(1B)
By investing in the National Pension System (NPS), you can claim an additional deduction of ₹50,000 over and above the 80C limit.
5. House Rent Allowance (HRA) Exemption
If you are a salaried individual paying rent, you can claim House Rent Allowance (HRA) exemption under Section 10(13A), reducing your taxable income.
6. Leave Travel Allowance (LTA) Benefits
Under Section 10(5), employees can claim LTA benefits for travel expenses incurred within India, provided they submit valid proof.
7. Standard Deduction for Salaried Individuals
A standard deduction of ₹50,000 is available for salaried and pensioned individuals, reducing taxable income automatically.
Final Thoughts
If your income is ₹1.5 lakh or below, you are already within the tax-exempt limit. However, if your earnings exceed ₹2.5 lakh, utilizing tax-saving investments under Section 80C, 80D, and other deductions can significantly reduce your tax liability.
By implementing these strategies, you can maximize savings while ensuring compliance with tax laws. Always consult a tax expert or use an income tax calculator to optimize your tax planning.
🚀 Start planning your taxes today and secure a financially sound future!
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