Time has come again for the income tax calculation. I have seen people are running to find the investment option at the last moment. Today, I will share 8 ways to save income tax without investment. Yes, you heard it right! You can save income tax without doing any extra investment.
We all know some of the most popular investment options like insurance premium, PPF, ULIP, Home loan, etc. For all these options, you have to do extra investment. But there are few provisions where you can save tax without shelling out any extra money.
Who doesn’t want to save tax? In India, so many products are being sold in the name of tax saving. There is nothing wrong with doing investment for tax saving. But what if I tell you some provisions where you can save tax without any extra investment.
Ways To Save Income Tax Without Investment
There are some investment options that you may be doing unknowingly. This means these investments or expenses can get you a tax rebate. As per the current tax slab, if your taxable income is below 5 lakhs then you will not have to pay any tax.
#1 House Rent Allowance (HRA)
If you are salaried then there might be a salary component in your salary called HRA. On the basis of HRA, you will get some tax relief. If you are not salaried then also you can get the HRA benefit.
If you are a salaried person the HRA will be covered under section 10(13A) of the income tax act. Let’s understand the HRA clause first. HRA calculation is as below.
- Actual HRA
- 50% of basic for the metro city and 40% of basic for non-metro city
- Rent paid – 10% of basic
HRA amount will be calculated as a minimum of the above three criteria.
For example, Amit Mishra is earning a salary of ₹. 60000 per month. Out of which his Basic salary is ₹. 20000. HRA component is ₹. 12000 and he is paying a rent of ₹, 15000 per month.
As per the above criteria, his actual HRA is ₹ 12000.
Now let’s assume that he is residing in metro city Mumbai. So 50% of the basic salary will be ₹ 10000
Rent paid ₹. 15000 – ₹ 2000 (10% of the basic ₹ 20000) = ₹ 13000
So the lowest amount is ₹ 10000, which will be calculated yearly i.e. ₹ 120000.
Expert’s TIP: If you don’t have a property in your name where you are living. You can pay rent to your parents and claim the HRA amount as a deduction in income tax.
Now let’s talk about the person who is not salaried. To claim HRA for the non-salaried person there is a section called 80GG. The criteria are as below
- Rent – 10% of the income
- 25% of the income
- ₹ 5000 per month
HRA amount will be calculated as a minimum of the above three criteria. Let’s say the lowest amount among the three is ₹ 5000/month. So that person can claim ₹ 60000 (₹ 5000 X 12 months) as HRA exemption.
So HRA is such a component wherein you don’t have to do any extra investment but you will get the tax benefit.
#2 Employee Provident Fund
Provident fund is an investment but you don’t have to do any extra investment to get the tax benefit. The exemption comes under section 80C of the income tax act. The overall limit under section 80C is ₹ 150000/year.
Employee provident fund is calculated as 12% of the basic salary + DA.
For our example of Amit Mishra, his basic salary was ₹ 20000/month. So his provident fund deduction would be ₹ 2400/month and ₹. 28800.
Here you don’t have to do any extra investment as EPF will automatically be deducted from your salary every month.
#3 Tuition Fees
If you have children and they are studying then you can claim the tuition fee as an exemption under section 80C of the income tax act. So the upper limit of tuition fees is ₹ 150000.
Points to remember while claiming tuition fees as exemption
- Only children’s fees can be claimed under this section
- Only full-time courses fees will be covered
- Playschool, school and college fees can be claimed
- maximum of 2 children’s tuition fees per taxpayer can be claimed
Let’s assume, Amit is having a child and he is paying ₹ 5000 per month as tuition fees. So he can claim ₹ 60000 / year as an exemption under this section.
#4 Stamp duty and registration charges
If you have purchased a property in the current financial year, you can claim the stamp duty and registration charges as an exemption under section 80C.
For example, Amit has bought a new house worth ₹ 50 lakhs. the stamp duty charges are around 7% so the amount would be ₹ 3.5 lakhs. But our upper limit under section 80C is ₹ 1.5 lakhs. So Amit can claim ₹ 150000 under 80C.
#5 Home Loan
There are two exemptions for a home loan. you can claim principal amount of the home loan EMI under section 80C and interest amount under section 24 of the income tax act. You can claim ₹ 200000/year for the self-occupied property as an interest component under this section.
Most of the people are taking a home loan for the tax benefit and as an investment option. Here you don’t have to do any extra investment. You can claim the good amount of exemption under this component.
#6 Education Loan
If you have taken an education loan, then you can claim the tax exemption on the interest paid of the education loan. The exemption can be claimed under section 80E of the income tax act. The criteria for exemption are as below.
- Only interest amount can be claimed
- Only higher education i.e. above 12th standard can be claimed
- You can claim the exemption for a loan taken for self, spouse or children
- An education loan can be for studying in India or abroad
- No upper limit on deduction (full interest is exempted)
- Maximum 8 years of deduction can be claimed
Let’s assume that Amit has taken an education loan and he is paying ₹ 50000 as interest for the year. this amount can be claimed as an exemption under education loan.
Many people are giving donations to government relief funds or any NGOs. This amount also can be exempted from the income tax under section 80G of the income tax act.
There is the prescribed organization for which you can claim exemption only. In some cases, you may get the exemption up to 100% or maybe 50% of the amount paid as a donation.
#8 Medical Treatment
If there is any chronic illness of medical treatment of yours or the dependent, then you can claim the medical expenses as an exemption under section 80DD. The criteria are as below.
- Over 40% disability of the dependent
- 40% to 80% disability – 75000 for dependent
- > 80% disability – 125000 for dependent
There is a similar clause for self disability under section 80U. The criteria are as below.
- Over 40% disability of the self
- 40% to 80% disability – 75000 for self
- > 80% disability – 125000 for self
Another section 80DDE is for chronic diseases. The criteria are as below.
- Covers specif diseases for self and dependent
- Actual treatment cost can be claimed
- Get up to ₹ 40000 deduction
- Get up to ₹ 60000 deduction for senior citizens
So these are the 8 options where you don’t have to do any extra investment but can get the tax exemptions.
Calculation – Save Income Tax Without Investment
Now let’s calculate the income tax amount for Amit Mishra after considering all of the above options.
|Income/Loss from Property|
|Income/Loss from property||-66000|
|Deduction under 80C|
|Home loan Principal||70000|
|Maximum limit of 80C||150000|
|Income from Property||-66000|
|Net Taxable Income||334000|
So the net taxable income of Amit Mishra is ₹ 334000. As per the current tax slab, there is no tax payable on the income up to ₹ 500000. So in this case, Amit will have to pay zero tax.
So as we have seen in the above example, there are many provisions where your expenses will help you to save tax. You don’t have to do any extra investment to save tax. Please check all the above components in your case and check whether there is any scope for exemptions or not. So this way you can save income tax without investment in India.