Saving taxes is important to create a good financial plan. However, people might have many questions about how to save taxes.
In this article, we will discuss a few FAQs that can help a person save more taxes under the new budget.
Every person looks for options that can help them save more on taxes. But it can be confusing for many to understand how to lower tax liability.
Here are some FAQs that can help a person understand how to increase tax savings-
What are the Tax Regimes?
Before understanding how to save taxes, a person needs to know the tax regimes. There are two tax regimes- the old tax regime and the new tax regime.
A taxpayer can opt for a tax regime that can allow him/her to save more taxes. The old tax regime allows various exemptions and deductions to lower tax liability, but the tax rates are higher. The new tax regime has lower tax rates, but a taxpayer can’t opt for most of the exemptions and deductions. A taxpayer needs to calculate taxes as per both regimes and choose the one that lowers the tax liability.
Are There Any Changes in the Tax Rates in this Year’s Budget?
There are no changes in the income tax slab rate (old as well as new regime) in this year’s budget.
What are the Income Tax Rates Under the Old and New Regime?
The Old Tax Regime
|Annual Income||The Old Regime|
|Up to Rs. 2.5 Lakhs||Nil|
|Between Rs. 2.5 Lakhs and Rs. 5 Lakhs||5%|
|Between Rs. 5 Lakhs and Rs. 10 Lakhs||20%|
|Above Rs. 10 Lakhs||30%|
The New Tax Regime
|Annual Income||The New Regime|
|Up to Rs. 2.5 Lakhs||Nil|
|Between Rs. 2.5 Lakhs and Rs. 5 Lakhs.||5%|
|Between Rs. 5 Lakhs and Rs. 7.5 Lakhs||10%|
|Between Rs. 7.5 Lakhs and Rs. 10 Lakhs||15%|
|Between Rs. 10 Lakhs and Rs. 12.5 Lakhs||20%|
|Between Rs. 12.5 Lakhs and Rs. 15 Lakhs||25%|
|Above Rs. 15 Lakhs||30%|
What are the Best Tax-Saving Options?
There are various tax saving options. Some of them are-
- Life insurance
Under Section 80C, the premiums paid to purchase life insurance can be claimed as a tax deduction up to Rs. 1.5 Lakh.
- National Pension Scheme (NPS)
As per Section 80C, the contribution made for NPS can be claimed for a tax deduction under Section 80C. A taxpayer can get additional tax benefit under Section 80CCD(1B) up to Rs. 50,000. Furthermore, in case 10% of the basic salary of an employee is contributed by the employer in the NPS, then the amount isn’t taxed.
- Unit-Linked Insurance Plans (ULIPs)
ULIPs are products that provide the benefits of life cover and investment. The premium paid to purchase a ULIP can be claimed as a tax deduction under Section 80C.
Are There Any Other Tax-Saving Options Other than Section 80C?
- A tax deduction can be claimed under Section 80D for paying premiums to purchase health insurance.
- Under Section 80EE, a taxpayer can claim a tax deduction for making interest payment of home loan for first-time homeowners.
- Under Section 24, a taxpayer can claim an interest deduction for a home loan up to Rs. 2 Lakhs.