The March 31 deadline for 2022–23 tax-saving investments implies that taxpayers should start their tax planning as soon as they can to prevent a last-minute rush.
The March 31 deadline for 2022–23 tax-saving investments implies that taxpayers should start their tax planning as soon as they can to prevent a last-minute rush. Taxpayers should be aware that they can reduce their total tax liability and increase their income without making any investments, even though the income tax act provides deductions under various sections for various investments, savings, and expenditures made by the taxpayer in a specific financial year. Based on an interview with 2 tax professionals, here’s how taxpayers can save tax only through expenses and without any investment.
The provisions of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’) w.r.t. the old tax regime provide the taxpayers with an opportunity to claim deductions and/or exemptions by way of incurring certain expenses or making certain investments. However, there are certain deductions/ exemptions which can be easily claimed by the taxpayer which do not require any additional investment or with respect to such expenditure or contribution which is generally incurred by the taxpayers. Few of such deductions/ exemptions are as follows:
(i) Standard Deduction u/s 16(ia)
Every salaried employee who is in receipt of salary income is allowed deduction u/s 16(ia) of Rs. 50,000 or the amount of salary whichever is less.
(ii) Deduction of Interest u/s 80TTA and 80TTB
Most of the individuals park their excess funds with the banks in the form of deposits on which interest income accrues. A maximum deduction under section 80TTA of Rs. 10,000 can be claimed by any individual taxpayers and HUFs with respect to interest from savings account. Further, in case of resident senior citizens aged 60 years and above, not only such deduction is enhanced to Rs. 50,000 u/s 80TTB but they can also claim interest on deposits (in addition to savings deposits) such as Fixed deposits.
(iii) Life Insurance Premium Paid u/s 80C
Life Insurance is an inevitable social security benefit incurred by individuals for self as well as for their family. Individual taxpayers making life insurance contributions for self, spouse and children can claim deduction u/s 80C with respect to such contributions subject to the overall threshold limit of Rs. 1,50,000. Further, it is to be noted that for the purpose of claiming such deduction, the life insurance premium cannot exceed the following mentioned limits:
| Particulars | Threshold Limit |
| Policy acquired before 1st April 2012 | 20% of actual capital sum assured |
| Policy acquired between 1st April 2012 to 31st March 2013 | 10% of actual capital sum assured |
| Policy issued on or after 1st April 2013 | 10% of sum assured (In case of persons with disability as per S. 80U or persons suffering from disease as per S. 80DDB, 15% of actual capital sum assured would apply) |
(iv) Children’s Tuition Fees u/s 80C
Individual taxpayers paying any tuition fees to al to any university, college, school or other educational institution situated within India can claim deduction u/s 80C (subject to the overall threshold limit of Rs. 1,50,000) with respect to such fees paid for maximum 2 children for their full time education purpose.
(v) Mediclaim Premium Paid u/s 80D
The medical inflation and the pandemic has made people realise the importance of Medical Insurance. Accordingly, mediclaim premium paid by an individual in respect of medical insurance or contribution to Central Government Health Scheme / notified scheme for self, spouse, dependent children or parents can be claimed as deduction of upto Rs. 25,000 (Rs. 50,000 in case of senior citizen) u/s 80D of the IT Act.
The higher limit of Rs. 50,000 would be applicable where medical insurance is bought in respect of health of any person who is a senior citizen. Also, such senior citizens above the age of 60 years who are not covered by Health Insurance, would be allowed deduction of Rs. 50,000 towards actual medical expenditure.
Further, deduction of ₹5,000 for any payments made towards preventive health check-ups shall be available within the aforementioned limits. It is pertinent to note that payments for such expenses should not be incurred in cash. However, payment for preventive health checkup can be incurred in cash.
(vi) Deduction with respect to rent paid u/s 80GG
Generally, many individuals staying away from their home towns for work related or other purposes end up paying rent. Those individuals receiving House rent allowance may claim exemption u/s 10(13A) of the IT Act (as discussed in detail in response to Q2). However, those individuals who are not in receipt of house rent allowance but still making rent payments may avail deduction u/s 80GG of the IT for the least of the following amounts:
Ø Rs. 5000 per month
Ø 25% of the adjusted total income
Ø Actual rent in excess of 10% of Adjusted total income
For the purpose of computing such deduction, Adjusted total income would be computed as Gross Total Income less deduction u/c VIA (except 80GG).
Deduction under this section would only be available if the individual taxpayer does not own residential accommodation either in his name or in the name of spouse or minor child.
(vii) Leave travel Concession u/s 10(5)
Vacation is a common phenomenon for most of the individuals. Every employee who is in receipt of LTA can claim deduction in connection with expenditure incurred (for self and family constituting spouse and children, parents, brothers and sisters who are wholly or mainly dependent on such individual taxpayer) towards travelling in India. The exemption of LTA can be availed for two journeys performed in a block of 4 calendar years i.e. 2022-2025, as per the prescribed conditions.
(viii) Repayment of Housing Loan
Owning a house is every indivdual’s dream and opting for housing loans is a common option for purchase of property. Individual taxpayers may also claim interest on housing loan u/s 24(b). Such interest deduction is restricted to Rs. 2,00,000 based on specified conditions in case of Self occupied house property whereas the taxpayers may claim the entire interest in case of a let out/ deemed to be let out property. Further, the taxpayers may claim deduction of the principal component of the repayment u/s 80C of the IT Act.
It is pertinent to note that taxpayers opting for the proposed new tax regime may not be able to claim any of the above deductions/ exemptions (except the deduction with respect to Standard Salary deduction u/s 16(ia) of the IT Act.
If the person is opting for the new tax regime in the FY 2023-24, in that case there will not be any tax implication till the gross salary of ₹7.5 L, as the standard deduction has been introduced in the new tax regime.
If however the person is opting for the old tax regime then instead of making investment the person can claim certain expenses which would reduce the tax liability.
1. HRA : If the person is staying in rent for employment purposes and his employer is giving him allowance to meet the rental expenditure, then he can claim HRA based on the figures provided as per the Income Tax Rules.
2. Interest on home loan : If the person has taken home loan for a self occupied flat/ house then upto ₹2L he can claim as deduction form his total income. This will be considered as loss form the house property
3. Principal on the home loan : The principal component on the home loan can be claimed as deduction under section 80C up to ₹1.5L
4. Registration fees paid for house : The registration charges for acquiring the house property can be claimed as deduction under section 80C
5. Interest on loan taken to purchase EVs : In case the person has purchased a EV, the interest on the loan taken till 31/03/2023 can be deducted form total income upto ₹1.5L.
Source: https://www.livemint.com/money/personal-finance/tax-saving-guide-how-to-save-income-tax-by-expenses-and-not-any-investment-11677939626296.html
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