We’d be lying if we say we don’t feel the pinch when we see the tax deducted in our salary slips. Mind you, evading taxes is criminal, not avoiding. Assuming that your income is below Rs. 10 lakhs, here is a way to bring down your taxes to zero by making use of every legal provisions and exemptions under the Indian Income Tax Act, 1961.
Use 80C to the fullest
Invest up to Rs. 1.5 lakhs in investments eligible for tax deduction under 80C. They include life insurance premium, home loan principal amount, tax-saving FD, Public Provident Fund and ELSS among others.
Choose investment as per your risk tolerance and investment goals. For instance, PPF and Sukanya Samriddhi Schemes are among the low-risk schemes, backed by the government, while ELSS (though a proven wealth-creator) is slightly on the riskier side.
Section 24 to claim deduction on Home Loan Interest
While people claim the deduction for principal payment of the home loan, many often overlook the interest, which is much more than principal, especially in the initial years of the tenure. You can claim a deduction for the interest component on the self-occupied house property up to Rs. 2 lakhs in a Financial year. There is no such upper limit for claiming the interest of a let out house property. Please note that this deduction can be claimed from the year in which the construction of the house is completed.
Section 80EE provides extra benefit for first-time home owners
You can also claim an additional deduction of Rs. 50,000 under Section 80EE provided the amount of the loan does not exceed Rs. 35 lakh and value of the property is less than Rs. 50 lakh. You should not own any other house property on the date of sanction of loan. So, you get a benefit of Rs. 2.5 lakhs in one go!
Section 80D exempts premium paid for health insurance
The annual premium (not exceeding Rs. 25,000) you shell out for health insurance can be claimed for tax exemption under 80D. However, if your plan includes a parental cover, you can claim an extra Rs. 50,000, in the case of senior citizens, the deductible sum becomes Rs. 75,000.
Section 87A allows rebate for ‘some’ income groups
Is your annual income Rs. 3.5 lakhs after deductions? Then you can claim additional deduction Rs. 2500 annually as per the 87A provisions.
Section 80G as a reward to benevolence and bounty
Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G. All donations, however, are not eligible for deductions under section 80G. Only donations made to specified funds, prescribed by the income tax rules, qualify as a deduction. Please note that any cash donation over and above Rs. 2000 will not quantify for deduction.
In essence, if your salary doesn’t exceed Rs. 10 lakhs and you make use of all the above provisions, you can get away with paying zero taxes this year.