How to Save Income Tax in India 2021 under Section 80C, 80D, 80E & Save Tax for Salaried Employees?
WHY THE RICH PEOPLE PAY LESS IN TAXES?
The reality is " The rich don't work for money"
Today we will talk about income tax.
Income Tax. Whenever we talk about income tax normally people tend to think that how complicated the topic might be. Because the financial year is about to end and this is the best time to know everything about the income tax that if you want to save your income tax by investing,
what can be the ways to do so?
Other than this we will talk about the difference between the old tax regime and a new tax regime. Because you still have time left wherein you can save income tax on your investments.
Friends in 2020's budget, India's finance minister brought the new tax regime of which the motive was to simplify the tax system but the one important point that you should know that under the new tax regime all the deductions and exemptions which were available in the old tax regime won't be available, but there is an advantage under the new regime that the income tax under the income tax slabs has been reduced.
So let's try to decode this question first that what is the difference between the old tax regime and the new tax regime.
| OLD RATES (with exemptions) | ANNUAL INCOME | NEW RATE (without exemptions) |
| Nil | Up to Rs.2.5 lakhs | Nil |
| 5% | Rs.2.5 – 5 lakh | 5% |
| 20% | Rs.5 – 7.5 lakh | 10% |
| Rs. 7.5 – 10 lakh | 15% |
| 30% | Rs. 10-12.5 lakh | 20% |
| Rs. 12.5-15 lakh | 25% |
| Rs. 15 and above | 30% |
To understand the difference see this above table where we will compare the income tax in the income tax slabs under both regimes. You can see three things tax slabs, old tax rates, and new tax rates.
So if we talk about
- 0 - 2.5L, under both the regimes you need not pay any tax,.
- From 2.5L till 5L you have to pay 5% tax under both regimes.
- 5L to 7.5L you had to pay 20% tax but under the new tax rates, you only have to pay 10% tax.
- 7.5L - 10L, 20% and 15% meaning here also a relaxation of 5%
- 10L -12.5L 30% and 20%, meaning you can see a 10% relaxation from the old tax regime to the new.
- 12.5L-15L you had to pay 30% under the old tax rate as compared to 25% under the new tax rate.
- From 15L and above the tax rate remains the same under both the regimes i.e., @ 30%
So friends this was about the tax slab rates under both the regimes, but if your income is above 15L you get different types of deductions and exemptions under the old regime meaning if you do any expenditure or any kind of investment. you did not have to give any tax on such incomes, soo you have to choose which one is best suited for you.
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deductions and exemptions
But before that let us talk about deductions and exemptions, what are they, how many types exist and how much tax you can save. But first, we have to understand the difference between both, because people tend to consider them the same.
To explain the difference between both, let me take a simple example. Assume there is a person A whose income is Rs 1Lakh on which he has to give tax in a hypothetical situation. So the income is 1Lakh under which there are different sources of income like HRA (HOUSE RENT ALLOWANCE) etc. Now let's say a portion of 20000 out of 1lakh is not taxable and his taxable income is 80000.
Now under 80000, the government has provided certain provisions regarding which if he invests according to them, more of his taxable income can be reduced.
Now assume if he invests 10,000 out of 80,000 according to the provisions his taxable income reduces to 70000. The concept of exemptions and deductions is derived from here, the 20000 on which he didn't have to pay tax was his exemption.
deductions
Now if we talk about deductions, certain provisions are promoted so that people perform savings and investments. Just like the 20000 was an exemption, the investment of 10000 out of 80000 is his deduction meaning that type of investment from his taxable income where he is not supposed to pay any tax. So this was the concept of deductions and exemptions, now let us understand what is included in them to make it easier to understand.
There are different headers of deductions and exemption of which benefits are provided to people.
If I speak about exemptions, an income under your income on which if you submit your proofs then you need not pay tax. So if you see your total income, HRA, leave travel allowance are incomes on which submitting proofs as per income you can get a tax benefit mobile and internet reimbursement, food coupons, company leased car, standard deductions are some incomes on which you can avail exemptions.
Now if you invest in PPF, ELSS, employee provident fund, LIC you can avail deductions on these but if we talk about these deductions, they are capped to a certain limit about which I will tell you in detail.
Now that you have understood about deductions and exemptions, before going into detail I'll go to my first question that many people have doubts about the old tax regime and new tax regime, so for that, you will need to do some calculations that if I remove deductions and exemptions from the old tax regime, will I have to pay less tax as compared to the new regime.
If you have to pay less income tax there, then the old tax regime is better for you, or else the new tax regime is suitable. So there cant be a one-word answer and varies from person to person where you need to perform some calculations.
deductions - UNDER SECTION 80C, 80D, 80E
Friends, now I will move to deductions and explain about capping and maximum limits under that. so if you chose the old income tax regime and you still have time to invest after which you can avail the tax benefits.
First and the most important is the 80C deduction, if you are a salaried employee you might have heard about it else I will tell you. Now assume if I take out the exemptions, your taxable income is 10Lakhs and you do investments worth 1.5 Lakh which come under 80C, so you won't have to give income tax on that 1.5 Lakhs.
So the deduction under 80C is capped at 1.5 Lakhs meaning the instruments I am going to tell you if you invest a total of 1.5 Lakhs in them then that means that you won't have to pay any income tax on those 1.5Lakhs.
Here you shouldn't get confused that you can invest 1.5Lakhs in every instrument and save all tax, whatever instrument is there under 80C, the total investment cap is 1.5Lakh. Now which options are available under 80C for that let me take you to my screen, you can see your provident fund contribution, if we talk about your pf, but the contribution done by you is calculated under 80C,
The second and most important is ELSS, a mutual fund where you invest in ELSS.
ELSS are mutual funds named equity-linked saving scheme, meaning if you invest in them today you cannot withdraw your money in the next 3 years.
so if you invest 1.5Lakh in ELSS, you don't need to pay tax on it under 80C and you won't be able to withdraw it for 3 years but whatever return you make on the mutual fund is only yours. So here you get 2 benefits, tax benefit as well as return on investment
Next, you can see tuition fees of 2 children, life insurance for self and spouse and unit-linked insurance plans which you call ULIP other than this national savings certificate and 5-year term deposit. If you put an FD for 5 years in a bank you can avail the 80C benefit.
From here you might have understood that under 80C assuming children's tuition fees of 20000, you have invested in the mutual fund of 50000, a total of 70000 after this, your PF contribution is 30000, a total of 1Lakh and the rest 50000 used for a 5 year FD a total of 1.5Lakhs gets a deduction under 80C.
So, friends, this is important for you today because the financial year will end on 31st March, if you haven't done investments worth 1.5Lakhs under 80C do now quickly soo that you can avail the benefits.
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The second and most important part is of National Pension Scheme NPS, under 80C you can do an investment of 1.5Lakhs but you can invest an additional of 50000 in NPS on which you can avail deduction, meaning this is on top of 1.5Lakhs.
So you can research on NPS, We make a separate article on NPS soo that we can explain to you the scheme and its benefits.
SECTION 80D
After 80C I will move to 80D where health insurance is promoted the government took different initiatives because you also know the importance of health insurance, hence the premium paid for it comes as a deduction under 80D. Assume you pay a premium of 15 to 20 thousand, you can claim it under 80D as a tax deduction.
SECTION 80E
Next is 80E, suppose you have a taken a load for higher education and the interest accrued on it becomes tax-free you can claim that interest under 80E as a deduction.
SECTION 80DD
Friends, there is another provision as 80DD, supposing that someone is dependent on you who is disabled and if you use any money on their treatment, you get a tax deduction on it, suppose the person is 40% disabled then you get a 75000 deduction on their treatment and if the disability is of 80% then this amount goes up to 1.25Lacs.
exemptions
Friends now let's talk in detail about exemptions if we speak about LTA (leave travel allowance) which is exempted from your salary from income tax for that you have to submit proofs to claim a deduction, if we see HRA you need to submit different types of documents to claim exemption coupons for food, the amount received from gratuity, the company leased the car which is a service provided by different companies. Whose benefit also comes under exemptions including expenses for telephone and internet.
So friends these are the things on which you can get exemptions on which you can avail income tax benefit. So friends after all this information, I would like to conclude the article by saying that income tax is very important and as a responsible person, you have to pay your income taxes, but the government has provided different provisions.
So that you can invest and promote investing and as a responsible citizen you should also use these provisions because you also get the benefit of paying less income tax, soo in total there are some investments and some expenditures to save tax. If you correctly report these expenditures and submit supporting proofs you get income tax exemptions on them and if you invest in provisions under 80C and 80E with supporting documents, you can avail income tax deductions.
So for deductions, you still have the whole of march left wherein if you invest right now you can get tax benefit under 80C. So friends quickly focus on these aspects and keep these in mind whenever making income.
Old vs New: A Comparison For Different Slabs
For Annual Income Up To Rs.5 Lakhs
- For senior citizens: Rs.3,00,000 to Rs.500000 – 5%
- Under Sec 87A, individuals with total income (after deductions) that do not exceed Rs.5 lakhs can claim a rebate of Rs.12,500.
| Annual Income of Rs.5,00,000 (without exemption) |
| Old Regime | New Regime |
| Income tax slab | Tax Rate (%) | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs. 2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| (-) Rebate | | -12500 | | -12500 |
| Tax Payable | | 0 | | 0 |
For Annual Income Up To Rs 7.5 Lakhs
| Annual Income of Rs.7,50,000 (without exemption) |
| Old Regime | New Regime |
| Income tax slab | Tax Rate | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs. 2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| 500001 – 750000 | 20 | 50000 | 10 | 25000 |
| Sum | | 62500 | | 37500 |
| Health and Education cess | 4 | 2500 | 4 | 1500 |
| Tax Payable | | 65000 | | 39000 |
| Annual Income of Rs.7,50,000 (with exemption) |
| Annual Income | 750000 | |
| Exemptions u/s 80C | -150000 |
| u/s 80CCD(1B) | -50000 |
| u/s 80D | -50000 |
| HRA | -10000 |
| Taxable Income | 4,90,000 |
|
| Old Regime | New Regime |
| Income tax slab | Tax Rate | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs.2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| 500001 – 750000 | 0 | 0 | 10 | 25000 |
| (-) Rebate | | -12500 | | |
| Sum | | 0 | | 37500 |
| health and education cess | 4 | 0 | 4 | 1500 |
| Tax Payable | | 0 | | 39000 |
For Annual Income Up To Rs.10 Lakhs
| Annual Income of Rs.10,00,000 (without exemption) |
| Old Regime | New Regime |
| Income tax slab | Tax Rate | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs.2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| 500001 – 750000 | 20 | 50000 | 10 | 25000 |
| 750001 – 1000000 | 20 | 50000 | 15 | 37500 |
| Sum | | 112500 | | 75000 |
| Health and education cess | 4 | 4500 | 4 | 3000 |
| Tax Payable | | 1,17,000 | | 78,000 |
| Annual Income of Rs.10,00,000 (with exemption) |
| Annual Income | 10,00,000 | |
| Exemptions u/s 80C | -1,50,000 |
| u/s 80CCD(1B) | -50,000 |
| u/s 80D | -75,000 |
| Taxable Income | 7,25,000 |
| Old Regime | New Regime |
| Income tax slab | Tax Rate | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs.2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| 500001 – 750000 | 20 | 50000 | 10 | 25000 |
| 750001 – 1000000 | 0 | 0 | 15 | 37500 |
| Sum | | 62500 | | 75000 |
| health and education cess | 4 | 2500 | 4 | 3000 |
| Tax Payable | | 65,000 | | 78,000 |
For Annual Income Up to Rs 12.5 Lakhs
| Annual Income of Rs.12,50,000 (without exemption) |
| Old Regime | New Regime |
| Income tax slab | Tax Rate | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs.2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| 500001 – 750000 | 20 | 50000 | 10 | 25000 |
| 750001 – 1000000 | 20 | 50000 | 15 | 37500 |
| 1000001 – 1250000 | 30 | 75000 | 20 | 50000 |
| | | | |
| Sum | | 187500 | | 125000 |
| Health and education cess | 4 | 7500 | 4 | 5000 |
| | 195000 | | 130000 |
| Annual Income of Rs.12,50,000 (with exemption) |
| Annual Income | 1250000 | |
| Exemptions u/s 80C | -150000 |
| u/s 80CCD(1B) | -50000 |
| u/s 80D | -75000 |
| Taxable Income | -975000 |
| | | | |
| Old Regime | New Regime |
| Income tax slab | Tax Rate | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs.2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| 500001 – 750000 | 20 | 50000 | 10 | 25000 |
| 750001 – 1000000 | 20 | 50000 | 15 | 37500 |
| 1000001 – 1250000 | 0 | 0 | 20 | 50000 |
| Sum | | 112500 | | 125000 |
| Health and education cess | 4 | 4500 | 4 | 5000 |
| Tax Payable | | 117000 | | 130000 |
For Annual Income Up To Rs 15 Lakhs
| Annual Income of Rs.15,00,000 (without exemption) |
| Old Regime | New Regime |
| Income tax slab | Tax Rate | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs.2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| 500001 – 750000 | 20 | 50000 | 10 | 25000 |
| 750001 – 1000000 | 20 | 50000 | 15 | 37500 |
| 1000001 – 1250000 | 30 | 75000 | 20 | 50000 |
| 1250001 – 1500000 | 30 | 75000 | 25 | 62500 |
| Sum | | 262500 | | 187500 |
| Health and education cess | 4 | 10500 | 4 | 7500 |
| | 273000 | | 195000 |
| Annual Income of Rs.15,00,000 (with exemption) |
| Annual Income | 1500000 | | | |
| Exemptions u/s 80C | -150000 | | | |
| u/s 80CCD(1B) | -50000 | | | |
| u/s 80D | -75000 | | | |
| Taxable Income | -1225000 | | | |
|
| Old Regime | New Regime |
| Income tax slab | Tax Rate | Tax (Rs.) | Tax Rate | Tax (Rs.) |
| Up to Rs.2,50,000 | 0 | 0 | 0 | 0 |
| 250001 – 500000 | 5 | 12500 | 5 | 12500 |
| 500001 – 750000 | 20 | 50000 | 10 | 25000 |
| 750001 – 1000000 | 20 | 50000 | 15 | 37500 |
| 1000001 – 1250000 | 30 | 75000 | 20 | 50000 |
| 1250001 – 1500000 | 0 | 0 | 25 | 62500 |
| Sum | | 187500 | | 187500 |
| Health and education cess | 4 | 7500 | 4 | 7500 |
| Tax payable | | 1,95,000 | | 1,95,000
|
Friends I hope that you liked the article today and if you have any questions regarding this please put them in the comments and we will try to reply to them and discuss them and even try to bring out an article soo that your questions are cleared.
If you liked today's article, please like and comment to let us know and please share it as much as possible so that your friends also know that why income tax is important and under which headers income tax can be saved.
Happy Investing!!
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Disclaimer: We make all articles for educational purposes. We don't give any buy/sell recommendations. Before investing in any stock do your own research and then invest in the long term.
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