For FY 2019-20, both salaried and self-employed individuals can minimize their tax income liability through efficient financial planning. Individuals with gross annual income up to Rs 7.75 lakh can even avail of tax deductions through various tax-saving investments to reduce their taxable income down to Rs 5 lakh or lower, and subsequently pay no income tax for FY 2019-20 (Individuals with annual income up to Rs 5 lakh are eligible for complete tax rebate under Section 87A).
It is to be noted here that the tax-saving benefits may vary from one individual to another based on various factors such as age, annual income, and tax saving investments. Here we would be discussing how you (as a taxpayer) can save taxes on their total gross income for the FY 2019-20 through common tax-saving avenues.
First, you can claim a Standard Deduction of Rs 50,000 for the FY 2019-20. The standard deduction limit is increased from Rs 40,000 (for FY 2018-19).
Second, you can claim tax deductions up to Rs 1.5 lakh investments in different tax saving avenues, as prescribed under Section 80C. These tax-saving instruments include contributions to Public Provident Fund (PPf), Employee Provident Fund (EPF), life insurance premiums, equity-linked saving schemes (ELSS), and unit linked insurance plans (ULIP). Overall, you can utilize different tax saving instruments under Section 80C to not only secure your life financially against any emergencies but also benefit from total tax savings.
You can enhance your tax savings further by up to Rs 50,000 through contributions into the National Pension Scheme (NPS). Your investment of up to Rs 50,000 will be tax-deductible under Section 80CCD (1B), taking your tally of tax savings up to Rs 2 lakh (combines savings under Section 80C and Section 80CCD)/
You can also contribute to your income tax savings by investing into a health insurance cover. Premium paid towards a health plan coverge for self and family, up to Rs 25,000 is tax-deductible under Section 80D of the Income Tax Act 161. This deduction can be further increased by an additional Rs 25,000 if you also pay the medical insurance premium for your parents (below 60 years of age).
Lastly, you can claim a tax deduction of up to Rs 10,000 on the accrued interest from a savings account, under Section 80TTA