Filing for and paying income tax to the government is every taxpayer’s responsibility. However, it is also your responsibility as a tax paying individual to ensure that you do not end up paying more income tax than is due to you. For this reason, the Indian government and the Income Tax Department has made provisions for taxpayers to avail a variety of options to lower their tax burden.
If your salaried income amounts to Rs. 6.5 lakh per annum, there are various ways in which you can save on your overall income tax liability. Let us take a closer look at the methods of tax saving for 6.5L income.
Assessing your Tax Slab
The first step towards tax saving for your 6.5L income is to determine which tax regime works best for you. A new tax regime was introduced in Budget 2020 that provides lower tax rates than the existing tax regime. Under this new tax regime, your salary of Rs. 6.5 LPA would fall under the tax slab of 10%.
This flat tax rate is far lower than the tax slab that your salary of 6.5 LPA would fall under with the existing tax regime - 20%. However, the important point to consider here is that the new tax regime does not allow taxpayers to avail various common and popular deductions. Hence, your options with tax saving for 6.5L income become limited.
If you want to avail the benefits of some of the highest tax-saving deductions, it is recommended that you opt for the old (that is, existing) tax regime. At the end of the day, it is recommended that you calculate your resulting tax burden under both regimes. Subsequently, you can opt for the one that best lowers your tax burden.
The Government of India has made provisions for a number of tax-saving instruments that allow taxpayers to avail a beneficial facility while saving on their income taxes. There is a wide variety of deductions you can avail for these tax-saving instruments.
Here are some of the most popular options you can choose for tax saving for 6.5L income:
To avail these deductions, you can invest in any of the following instruments:
National Pension Scheme (NPS) - A government-backed pension scheme that allows public, private and unorganised sector employees to build a retirement corpus and avail pension. You can avail deduction of 10% of salary as employee contribution and avail deduction under Section 80CCD (1). In addition, you can also avail deductions under 80CCD (1B) for self-contribution and Section 80CCD (2) for Employer contribution to your pension account.
Donations - You can also avail tax saving for 6.5L income while carrying out a noble deed such as donation to a charity, relief fund or recognised NGOs. The amount of donations will be exempted from taxation under Section 80G of the Income Tax Act.
Others - You can also avail tax saving by the means of House Rent Allowance, interest on education and home loans and investments in the Rajiv Gandhi Equity Saving Scheme.
Overall, there is a range of tax-saving options available for you to avail tax saving for 6.5L income. At the end of the day, every taxpayer must determine his financial priorities and opt for the tax-saving instruments and schemes that best fit his portfolio.Having said that, if there is one tax-saving option that is recommended for every tax paying individual and family, it is that of a reliable term insurance plan.
To that end, an exceptional option is available in the form of the iSelect Star Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance. This customised insurance plan not only allows tax saving under Section 80C but also safeguards the finances of your family for years to come. Moreover, the iSelect Star Term Plan is accompanied with features such as whole life cover, return of premium, multiple payout option and various add-on covers.
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