How To Save Taxes

Focus on your financial goals, and tax benefits will follow

Gaurav Mashruwala Updated: Jul 19, 2019 13:26:29 IST
How To Save Taxes

The year 1973–74 will go down as one of the darkest years in the history of personal income tax in India. That year, the highest rate of personal income tax was 97.75 per cent. At the time it was perfectly normal for taxpayers to focus only on tax-saving instruments.

Today we are in a comparatively lower tax regime, with the rate of taxation ranging from 5 per cent to a maximum of 30 per cent plus levies. Also, there are a number of tax benefits within the Indian Income Tax Act that covers our basic needs.

However, many people, especially young earners—new to the world of financial responsibility—remain unaware and unsure about the multitude of options that exist today to help them save on taxes. As we approach the end of the financial year, banks, financial institutions and accountants will bombard taxpayers, pushing a variety of tax-saving instruments. You should remember that while it is prudent to take advantage of legitimate tax-saving schemes, the focus should primarily be on your financial goals. We save money not to save tax, but to ensure that we have sufficient funds for our future responsibilities. Therefore, focus on a solid financial plan; tax-saving will follow on its own.

Compare this to a three-wheeled autorickshaw—the front wheel of this vehicle (a person’s financial goals) provides direction, while the two rear wheels (investments and tax-saving instruments) push it forward. Only when all three wheels move in a synchronized manner can we reach our destination. Similarly, a focused plan with clear-cut bottom lines must work together with the right investments and tax-saving avenues (such as the ones listed below) to ultimately help you limit your tax-burden.


Health insurance

There are a number of tax benefits associated with health-related expenses. Paying a health insurance premium allows for a tax deduction under section (u/s) 80-D, as do health check-ups and premium payments for our parents. Section 80-U offers tax benefits for expenses incurred by a resident individual who has been certified as a person with a disability by a medical authority. Additionally, sections 80-DD and 80-DDB cover disabilities and critical illnesses of one’s dependents.

Keep in mind that there are restrictions to prevent duplication of claims. For example, if a man has made a disability claim for his wife under section 80-DD, the wife cannot claim her own disability benefit under section 80-U. Life insurance premiums also get tax deductions under section 80-C.



After protecting our health and life, our next need is housing. While section 80-GG allows for tax benefits for individuals living in a rented house, section 80-C offers deductions on the principal repayment of housing loans. Additionally, the interest paid on housing loans has a benefit of up to Rs 2 lakhs according to section 24-B. There are even benefits on capital gains when a person sells a house and purchases another one u/s 54.



School fees for our children are covered u/s 80-C and the interest amount on funds borrowed for higher education is deducted from one’s taxable income u/s 80-E.



Saving for old age is another major financial goal. When we start creating a nest egg for post-retirement life, individuals can get a tax relief as per sections 80-C, 80-CCD and 80-CCE. The overall limit across all these sections is up to Rs 2 lakhs.


Interest on savings accounts

The amount earned from interest on a savings account with a bank, co-operative society or post office can be claimed as deduction u/s 80-TTA as per the prescribed limits. Deductions are also available for investments in debt- and equity-based instruments. Equity Linked Savings Schemes—an equity-based mutual fund—offers a tax benefit u/s 80-C; debt-based instruments, such as National Savings Certificate, Public Provident Fund and some bank fixed deposits attract deductions u/s 80-C. Above all, always consult an accountant while planning your goals.           


Gaurav Mashruwala is a Mumbai-based financial planner and author of Yogic Wealth: The Wealth That Gives Bliss.

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