Strategies for Tax Savings for the Financial Year End 2023-24

As the financial year end 2023-24 is approaching, it’s highly important to seize each and every opportunity in order to save on taxes. “A penny saved is a penny earned”, as the saying goes tax planning is a way to save on taxes and boost your income.

Even if you are a pro or a newcomer to the world of finance, understanding strategies can help you make a significant difference in your tax bill. In this Blog, we will look into the hidden ways to save tax and Strategies for Tax Savings at the year-end 2023-24.

What is Tax Saving?

Tax saving involves minimizing the amount of taxes paid on various types of income, such as salary, business earnings, rent, and investments. It encompasses declaring investments to qualify for tax deductions as allowed by the Income Tax Act. Tax-saving investments, which offer deductions under sections like 80C, 80CCD, and many more play a vital role in financial planning. Let’s understand the detailed list of tax-saving options under different sections.

Here’s a breakdown of sections with their investment options to guide you on saving taxes under each section.

Section	Investments	Exemption Limit
80C	Investments in PPF, PF, insurance, NPS, ELSS, etc.	150,000
80CCD	NPS investments	50,000
80D	Investment in medical insurance for self or parents	25,000/50,000
80EE	Interest on Home loan	50,000
80EEA	Interest on Home loan	1,50,000
80EEB	Interest on electric vehicle loan	1,50,000
80E	Interest in education loan	Full amount
24	Interest paid on the home loan	200,000
10(13A)	House Rent Allowance (HRA)	As per the salary structure

Which investment options are available under Section 80C?

Investment	Returns	Lock-In Period
Unit Linked Insurance Plan (ULIP)	Varies with Plan Chosen	5 years
Sukanya Samriddhi Yojana (SSY)	8.00%	N/A
Senior Citizen Saving Scheme (SCSS)	8.20%	5 years
Public Provident Fund (PPF)	7.1%	15 years
National Savings Certificate	7.7%	5 years
National Pension System (NPS)	9% to 12%	Till Retirement
ELSS Funds	15% to 18%	3 years
5-Year Bank Fixed Deposit	6% to 7%	5 years

• Unit Linked Insurance Plan – This Plan is an insurance product that integrates life insurance coverage with investment opportunities. A portion of the premium is allocated to insurance, while the remainder is invested across different funds. ULIPs provide flexibility in selecting investment options and modifying coverage levels. They usually come with a lock-in period and include features such as partial withdrawals and top-up premiums.
• Sukanya Samridhi Yojana – Parents with a daughter under the age of 10 can take advantage of the Sukanya Samriddhi Yojana (SSY) scheme. Additionally, they qualify for a tax deduction under Section 80C for investments made in this scheme, up to Rs. 1.5 lakhs. The SSY account has a duration of 21 years or until the daughter gets married after reaching 18 years of age.
• Senior Citizen Saving Scheme – Senior Citizen Saving Scheme (SCSS) is a government-supported, extended-term tax-saving choice. It spans five years and is accessible to individuals aged 60 and above. Offering an interest rate of 8.2% (taxable), this scheme permits tax deductions of up to Rs 1.5 lakh.
• Public Provident Fund – The Public Provident Fund (PPF) is a government-backed savings scheme designed for the long term, lasting 15 years. Widely accessible at banks and post offices across India, it serves as a popular income tax-saving instrument. Interest rates are revised quarterly, with the present rate set at 7.1%, as outlined in the latest circular.
• National Saving Certificate – The National Savings Certificate (NSC) is another notable tax-saving scheme, offering a fixed annual interest rate of 7.7% and a duration of five years. Interest earned on NSC is recognized as a tax-saving measure, allowing for a deduction of up to Rs 1.5 lakh under Section 80C.
• National Pension System – The National Pension System (NPS) is a government-regulated retirement savings scheme where individuals contribute regularly towards their pension account, which is invested to provide retirement income.
• ELSS Funds – ELSS is a mutual fund variant with a three-year lock-in period, uniquely eligible for tax deductions under Section 80C of the Income Tax Act. ELSS typically offers higher returns over the long term compared to other tax-saving options, as it primarily invests in equity markets.

These investment options that are available under section 80C can assist individuals in order to know “How to save tax on their salary.”

Tax Saving Options other than Section 80C

Finding ways to save income tax beyond Section 80C is a common query among taxpayers. Apart from the deductions available under Section 80C, there are various other avenues to minimize income tax. For instance, you can benefit from tax deductions on health insurance premiums and home loan interest.

Listed below are some such provisions:

1. Medical Insurance: You can claim a deduction of up to Rs. 25,000 for Senior Citizens Rs.50,000) regarding medical insurance premiums.
2. Home Loan Interest: The claimed amount for the deduction can be up to Rs.50,000 on home loan interest under Section 80EE.
3. National Pension System (NPS): You can claim a tax deduction of up to Rs. 1.5 lakh for contributions to NPS under Section 80CCD.
4. Education Loans: Under Section 80E, you can claim a deduction on interest paid on education loans.
5. Charitable Donations: Contributions made to notified institutions or funds can be deducted under Section 80G.
6. Capital Gains: Under Section 54-54F, you can claim exemptions on capital gains.
7. Electric Vehicle Loan: Under Section 80EEB, interest deduction for a vehicle loan for purchasing an electric vehicle can be claimed.
8. Savings Bank Interest: Under Section 80TTA, you can claim a deduction of up to Rs. 10,000 is available for interest earned in a savings bank account.

How to save tax without investment?

Saving tax without investing means using different tax benefits provided by the government. This includes deducting expenses like medical bills, school fees, home loan interest, and charity donations. You can also avoid paying tax on allowances like House Rent Allowance (HRA) or Leave Travel Allowance (LTA) given by your employer. Saving in retirement accounts like the Employee Provident Fund (EPF) or the Public Provident Fund (PPF) can also help you get tax deductions.

Additionally, buying health insurance lets you deduct the premiums you pay according to Section 80D, and interest on education loans for higher studies qualifies for deductions under Section 80E. For home loans, the interest payments are deductible under Section 24, while the principal repayments qualify under Section 80C. Moreover, you can claim a deduction of up to Rs. 10,000 for interest earned on savings accounts under Section 80TTA.

Conclusion

As the end of the financial year approaches, adopting these tax-saving tactics can assist in optimizing your financial situation and reducing your tax obligations. Whether you’re refining your investment strategies, capitalizing on available deductions and credits, or strategizing charitable contributions, proactive tax planning can result in substantial savings. Remaining knowledgeable and acting before the year-end cutoff allows you to pave the way for a financially stable future while retaining more of your hard-earned money.