As the financial year of 2024 comes to an end, the quest to discover effective ways of saving tax begins. Dealing with taxes during this time comes with its own challenges. Most individuals are busy stressing over meeting deadlines and ensuring all financial documents are in order. Thus, it becomes crucial to not only identify alternative avenues of tax saving but also to make informed and thoughtful decisions.
While most individuals are well-aware of deductions under 80C, there exist other lesser-known options that can significantly contribute to maximizing your tax savings. Let’s explore a few of these options that will shed light on ways to make the most out of the last two months of this financial year.
HRA Exemptions
If you're renting a place, don’t forget to use House Rent Allowance (HRA) exemptions. Keep a record of your rent payments and give them to your employer – this can lower your taxable income. The exemption is granted based on the least of the following three factors:
1. The actual HRA received by the employee.
2. 40% of the basic salary for non-metro cities or 50% of the basic salary for metro cities such as Mumbai, New Delhi, Kolkata, and Chennai.
3. The actual rent paid, minus 10% of the basic salary.
Do note that HRA deduction applies only to the rent paid for the place you live in and doesn't cover expenses like electricity and gas. By following these clear rules, you can make sure you're following tax regulations correctly and make smart choices accordingly.
Home Loan Interest
Homeownership comes with its perks. Under Section 24(b) of the Income Tax Act, you can avail deductions on the interest paid towards your home loan. It's important to keep a record of the interest component in your EMI payments. If the property is self-occupied, you can claim a deduction of up to ₹2 lakhs per financial year. However, this is applicable only if you complete building the house within 5 years; otherwise, the deduction is limited to ₹30,000. First-time homebuyers can also benefit from an additional interest deduction of ₹1.5 lakh under Section 80EEA. If you've taken a home loan for an under-construction property, the good news is that you can start claiming deductions on the interest paid during the construction phase itself.
Green Loan
If you’re planning to buy a car, opting for an e-vehicle will be a smart move. Section 80EEB of the Income Tax Act provides an opportunity to save up to ₹1.5 lakh on the interest paid for a loan exclusively taken to buy an electric car. It's important to note that specific conditions related to the loan issuer and the electric vehicle must be adhered in order to claim the deduction. Moreover, the IRS (Indian Revenue Service) incentivizes eco-friendly choices, providing tax credits for the installation of alternative energy charging stations to encourage environmentally conscious decisions.
Health Insurance Premiums
Prioritizing your health is an invaluable investment. Thus, investing in a health insurance plan not only secures your well-being but also helps you save on taxes. Section 80D allows deductions for premiums paid towards health insurance policies for yourself, family and parents. You can opt for HDFC Life Sanchay Plus that offers a comprehensive approach to both health security and potential tax benefits.
Here are some of its features:
Life cover to protect the family's future.
Steady retirement income with lifelong income.
Guaranteed benefit payouts.
Guaranteed income for a fixed term of 10, 12, 25, 30 years or lifelong.
Tax benefits as per prevailing tax laws.
Return of total premium(s) paid at the end of payout period.
It becomes clear that the last two months of the financial year is a great opportunity to explore lesser-known avenues. As we approach the year end, let's not only focus on maximizing our tax savings but also on building a more resilient and secure financial future.
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