How to Save Tax in New Tax Regime in India

Your tax filing deadline for might be months away. But if you want to step up your tax planning, it’s time to start identifying tax-saving options. Doing this allows you to strategize your financial planning in a way that reduces your tax liability considerably. And we make this a breeze by giving you a quick checklist.  

Here are four smart tax saving options that allow you to increase your disposable income and increase your savings with ease.

1. Maximise the Application of Section 80C

A smart way to save tax in 2024, is by stretching the effect of Section 80 of the Income Tax Act 1961 to its limit. This powerful provision allows you to scale your disposable income considerably by allowing tax deductions of up to Rs 1.5 Lakh. However, it's applicable to select tax-saving investments, such as,

2. Take out a Health Insurance Policy

Given the rising pollution levels and medical costs, coupled with the fast-paced life we lead, it's important to have a health insurance policy in today’s day and age. And the best part is that these policies don’t just cover your medical bills, but also offer a significant tax-saving option. 

Section 80D of the Income Tax Act 1961 allows you to claim tax deductions of up to Rs 1 Lakh on your health insurance policy premiums.

3. Utilise a Home Loan for its Tax-Saving Benefit

Home loan repayment is another great avenue to save tax in 2024. Under Section 80 of the Income Tax Act 1961, you can claim tax deductions of up to Rs 1.5 Lakhs on the repayment of the principal amount. 

Under Section 24 of the act, you can claim a maximum of Rs 2 Lakhs on home loan interest repayment. So, if you’re planning on applying for a home loan, or already have one underway, this can be a great tax-saving option for you.

4. Choose the Right Tax Regime

Being aware of the new and old tax regimes allows you to have a balanced and informed view of how best to save taxes. The Union Budget 2023-24 introduced a new regime that lowered tax rates for higher income levels. But while a new regime had been introduced, the old regime was also applicable. 

Tips on How to Save Taxes in India

Here are a few tips to save on your taxes in India-

1. If tax-saving is one of your primary investment goals, avoid buying gold or other precious metals and gold carries a high tax rate and does not generate much income.

2. Make sure to have a valid PAN card to get the benefits of tax-saving investments in India.

3. To save money, know and use your income tax deductions correctly and claim them on your tax return.

FAQs on how to save tax

How to reduce tax on salary?

You can reduce tax on your salary by maximising deductions under sections like 80C, 80D, and 80E, investing in tax-saving instruments like PPF, ELSS, or NPS, and claiming home loan or health insurance exemptions where applicable.

How can I make my income tax less?

You can lower your income tax by utilising deductions and exemptions, investing in tax-saving schemes, contributing to retirement funds, and opting for specific tax benefits like home loan interest or education loan repayment deductions.

How can I save tax in a new tax regime?

The new tax regime offers lower tax rates but fewer exemptions. To save tax, claim standard deduction, save on employer contributions to EPF or NPS, and consider deductions under section 24(b) of the ITA for the interest paid on home loan for a let-out property.

Is 80C allowed in the new tax regime?

No, Section 80C deductions are not allowed in the new tax regime. The new regime simplifies tax filing but removes most exemptions and deductions available in the old regime.

How can I save 100% tax?

There are many tax-free investment options investors can choose from. These include life insurance plans, public provident fund (PPF), new pension scheme (NPS), five-year bank tax saver fixed deposit (FD), EPF, five-year post-office term deposit, and senior citizens saving scheme (SCSS).