Tax planning is a key part of handling your personal finances wisely. With the right approach, you can take advantage of the deductions and exemptions provided under the Income Tax Act, 1961, and significantly cut down your taxable income. Whether you are employed, self-employed, or running a business, knowing which benefits you can claim makes a big difference in how much you save.
As the filing season for FY 2024-25 and Assessment Year 2025-26 is underway, understanding these tax-saving options will help you file your return accurately and get the maximum benefits. The deductions you can claim depend on the tax regime you choose. The old regime offers several deductions and exemptions, while the new regime keeps rates lower but limits the available deductions.
Popular Tax Deductions and Exemptions
Section 80C
This is one of the most commonly used sections for tax savings. You can claim up to Rs 1.5 lakh annually by investing or making payments in options such as:
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- Life Insurance Premiums
- Equity-Linked Savings Schemes (ELSS)
- Five-Year Fixed Deposits with banks
- Sukanya Samriddhi Yojana
- Principal repayment of a home loan
- Tuition fees for up to two children’s education in India
- Senior Citizens’ Savings Scheme (SCSS)
- Unit Linked Insurance Plans (ULIPs)
- Post Office Time Deposits (five years)
Section 80D
Healthcare expenses can be heavy, but this section provides additional savings over and above Section 80C.
- Up to Rs 25,000 for premiums paid for self, spouse, children, or parents
- Up to Rs 50,000 if parents or family members covered are above 60 years
- Preventive health check-ups up to Rs 5,000 can also be claimed
House Rent Allowance (HRA)
For salaried individuals paying rent, this exemption provides relief. The exempted HRA is the lowest among:
- Actual HRA received
- 50% of salary (for metros) or 40% (for non-metros)
- Rent paid minus 10% of salary
Section 24(b)
Interest paid on home loans qualifies for an exemption of up to Rs 2 lakh annually for a self-occupied property, provided the house is built or bought within five years. Combined with Section 80C principal repayment, this offers strong tax savings for homeowners.
Standard Deduction
- Old regime: Rs 50,000
- New regime: Rs 75,000
Leave Travel Allowance (LTA)
Allows salaried employees to save tax on travel expenses within India, restricted to actual transport costs. This benefit can be claimed twice in a four-year block, subject to submission of travel proofs.
Capital Gains Exemptions
Capital gains from property or assets can also be reduced under specific sections:
- Section 54: Exemption on gains from selling a house if reinvested into another residential property.
- Section 54EC: Exemption when invested in specified bonds within six months.
- Section 54F: Savings from selling assets other than a home, provided the proceeds are reinvested into a residential property.
- Section 54B: Exemption on sale of agricultural land if proceeds are used to buy new farmland within two years.
- Section 54D: Applies to compulsory acquisition of industrial land or buildings when reinvested in new industrial property.
- Section 54EE: Exemption on long-term capital gains if invested in specified funds, capped at Rs 50 lakh per year.
Tax planning is not just about filing returns but also about managing your money smartly. By making use of these deductions and exemptions, you can lower your overall tax liability and keep more savings intact for future goals.
