Tax Exemption: All you Need to Know

2025-05-13

1059 Views

5 minutes read

Begin securing your future

Full Name* Please enter correct name Please enter the Full name

Mobile Number* Please enter valid mobile number Please enter Mobile Number

Email* Please enter valid email Please enter Email

I agree that even if my contact number is registered with NDNC / NCPR, I would still want the Company to contact me on the given number and email id for the clarifications/product information sought by me and agree that I have read and understood the Privacy Policy and agree to abide by the same.

...Read more Consent is required

Locate branch

Resume journey

Pay Premium

Live Life More Confidently

Get best insurance from our experts

Name is required Name should be Valid

Mobile Number is required Mobile Number should be Valid

Email is required Email should be Valid

DOB is required DOB should be Valid

Annual Income*

< 3 3-5 5-7 7-10 > 10

Annual Income is required

Please tick to proceed further.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

All earning individual knows what tax is and how it works. With several types of taxes out there, a lot of the hard-earned money goes towards them. This is where tax exemption comes into play. Tax exemption is the practical reduction or removal of the money that goes into paying the compulsory amount to the Government. This process is vital in boosting long-term investments and providing the financial scope for life insurance planning.

What are Tax Exemptions?

While tax exemptions are related to tax deductions, the latter is when a taxable income is excluded from taxation, given that the necessary conditions are met. This can also be done by reducing the gross income of the taxpayer. Exemptions are a part of the tax-saving plan, which allows the taxpayer to exercise their right to remove all or some parts of their taxable amount.

Navigating the Current Tax Regimes: Old versus New

Before delving into some exemptions, it's important to know about India's dual tax regime system. Taxpayers are allowed to opt for the Old Tax Regime (OTR) or the New Tax Regime (NTR).

From FY 2025-26 (AY 2026-27), the New Tax Regime continues to be the default. The tax rebate has gone up from ₹25,000 to ₹60,000 for the financial year 2025–26. Thanks to this update in the tax system, anyone earning up to ₹12 lakh won’t have to pay any income tax. And if you're a salaried employee, you’re even better off. After factoring in the standard deduction of ₹75,000, there’s no tax to be paid on income up to ₹12.75 lakh. Let us show you how:

Income Tax Slabs	Income Tax Rates
₹ 4 lakh and below	0
₹ 4 lakh to ₹ 8 lakh	5%
₹ 8 lakh to ₹12 lakh	10%
₹ 12 lakh to ₹16 lakh	15%
₹ 16 lakh to ₹ 20 lakh	20%
₹ 20 lakh to ₹ 24 lakh	25%
More than ₹ 24 lakh	30%

Yet, a major difference is that all of the widely used deductions and exemptions described below (like HRA, LTA, Section 80C, Section 80D, etc.) are offered mostly only if you specifically choose the Old Tax Regime. Meanwhile, the older regime remains largely the same except for the increase from ₹50,000 to ₹1,00,000 on the standard deduction for senior citizens. So, people have to go through a careful assessment each year of which regime is best suited for their individual financial profile.

Tax Exemption Earning

While tax exemptions are related to tax deductions, the latter is when a taxable income is excluded from taxation given that the necessary conditions are met. This can also be done by reducing the gross income of the taxpayer. Exemptions are a part of the tax-saving plan, which allows the taxpayer to exercise their right to remove all or some parts of their taxable amount.

Tax-exempt earnings are excluded from the compulsory tax criteria set by the state or federal government. These incomes are not deducted in terms of the taxable amount for the particular financial year and so remain completely free of tax. Investment in mutual funds is a great example of tax-exempt income as the interest earned on mutual bonds is not liable to state or federal taxes.

Some of the common tax-exempt earnings include shares from a partnership firm, income from gratuity, amount under voluntary retirement, and capital gains, and particular exemptions like House Rent Allowance (HRA) and Leave Travel Allowance (LTA). Also, deductions under Section 80C (like investments in PPF, ELSS, and life insurance) and Section 80D (premiums paid for health insurance) also contribute significantly to lowering the overall taxable income.

Tax Savings Insurance Plan

Financial security is one of the most talked-about topics today. While it might be unrealistic to always be financially secure, being prepared for the financial hurdles is surely possible. There are many tax benefits with life insurance that provide an opportunity for you to take your present and future expenses into consideration to ensure that you are never off the road. While there are many kinds of insurance plans that can save you on rainy days, life insurance becomes the most crucial of them.

Life insurance plans offer the family members of an insurance holder a degree of financial freedom after the insurance holder’s death. This policy becomes increasingly crucial for families where a single member is the sole breadwinner. This puts a great amount of responsibility on a single member of the family. A specifically curated life insurance plan can help sole earners of a family to manage such responsibilities better.

Can a Term Insurance Plan help you Save Tax?

Yes. Term insurance plans are amongst the most popular insurance plans. They play a vital role in tax-exemption as they offer affordable and premium offers specific to your requirements.

These plans provide financial benefits and also protects your family from critical diseases like cancer, diabetes, etc. The death-related benefits of term plans can be utilised after a specified time has passed from the day of policy purchase, which is fully exempt from the Income-tax policy of India. Additionally, a deduction is also provided in the premium amount that has been paid by the late investor to contribute to their coping.

Term plans also allow the beneficiaries to utilise the tax-saving plans under section 80C, section 80D, and section 10(D). The ideal approach to choosing the best insurance planl includes thorough research on these allowances and benefits to find the one that best matches your needs.

If you are looking for a term insurance plan that provides ample coverage at a reasonable rate, you should consider iSelect Smart360 Term Plan by Canara HSBC Life Insurance.

FAQs Related to Section 80GG

Adjusted total income is that part of your Gross Total Income for the financial year which excludes the following incomes:

a) Income received from a foreign company
b) Any income received as an NRI that is taxable at a special rate
c) Long-term capital gains of the financial year
d) Short-term capital gains that are taxable at 10% under section 111A
e) Deductions from gross total income under sections 80C to 80U except for 80GG

Yes, it applies to all categories of individual taxpayers including NRIs.

No, you cannot claim deduction under section 80GG if you are receiving a home rent allowance with the salary. Deduction under section 80GG is available only to those individual and HUF taxpayers who are either self-employed or not receiving HRA as part of the salary.

Paying rent for residential property allows you to avail of tax deductions either as HRA or under section 80GG. While deduction for HRA is available based on the allowance received and rent paid, section 80GG is available to you when you do not receive HRA but live on rent. Section 80GG deduction is limited to the minimum of the following three:

a) Rs 5000 per month or Rs 60,000 for the financial year
b) Rent paid over 10% of Adjusted Total Income
c) 25% of the Adjusted Total Income

Yes, you can claim a deduction under section 80GG while staying with your parents. However, you need to meet the following conditions:

a) There is a rent agreement between you and your parents
b) You are paying rent to your parents which they show as income in their ITRs for the relevant financial years

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

Tax Evasion: What is Tax Evasion, Methods and Penalties

Tax Exemption vs Tax Rebate: Key Differences & Examples Explained

Tax Savings - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.