In India, the calculation of tax liability is based upon different income tax rate slabs. In other words, the amount of tax you have to pay or can save depends upon your overall taxable income and the tax category in which your income falls into. For the FY 2019-20, individual taxpayers whose taxable annual income is less than Rs.5 lakh are eligible to claim full income tax rebate under Section 87A. This implies that if you earn up to Rs 5 lakh, you will not have to pay any income tax. Also, the income tax slabs and the rates will remain unchanged for the financial year.
To help lower the overall tax liability, the government of India offers a variety of tax-saving instruments as prescribed under the various sections of the Income Tax Act 1961. Taxpayers can utilize these instruments to lower their tax liability while reaping long-term financial benefits. The amount of investments into these instruments varies from one individual to another, based on their age, annual income, liabilities, life goals, and risk appetite.
Click here to know - Tax Saving Tips
Let us look at how much you can reduce your overall taxable income using these investments and voluntary spending. If we consider that you avail of the commonly available tax deductions only, you can save up to Rs 4,75,000* (details provided in the table below) for the Financial Year 2019-20 (Assessment Year 2020-21)
|Deductions||Max Amount (Rs.)|
|Section 80CCD(1B) NPS||50,000|
*Please note that this amount only includes expenses and investments you can avail of as a taxpayer.
Moreover, you can utilize the following types of investments to lower your overall taxable income and maximize your tax savings –