Salaried individuals can significantly reduce their tax liability by utilizing various exemptions, deductions, and allowances provided under the Income Tax Act. Below are some practical and effective tax-saving options:

House Rent Allowance (HRA)

House Rent Allowance (HRA) offers a key tax-saving opportunity for salaried employees living in rented accommodation. If you receive HRA as part of your salary, a portion of it may be exempt from tax under Section 10(13A).

To claim this exemption, you must submit rent receipts to your employer or claim it directly while filing your income tax return.

Leave Travel Allowance (LTA)

Leave Travel Allowance (LTA) allows salaried employees to claim tax exemptions on travel expenses incurred during domestic vacations.

Key points to note:

• Applicable only for travel within India

• Covers travel costs for the employee and immediate family members

• Includes expenses for air, rail, or bus tickets

• Does not cover accommodation, food, or sightseeing expenses

• Proof of travel, such as tickets, must be submitted to the employer

• Exemption is available for two journeys within a four-year block, as defined by the government

Children’s Education Allowance

Salaried employees can claim tax relief through the Children’s Education Allowance, which provides an exemption of ₹100 per month per child, for up to two children, provided they are enrolled in recognized educational institutions.

Proper documentation must be maintained to support the claim. This allowance helps ease the financial burden of educational expenses while offering tax benefits.

Deductions Under Sections 80C, 80CCC, and 80CCD(1)

The Income Tax Act offers substantial tax-saving opportunities through Sections 80C, 80CCC, and 80CCD(1), with a combined deduction limit of ₹1.5 lakh per financial year.

Section 80C

Section 80C is one of the most popular tax-saving provisions and allows deductions for investments and expenses such as:

• Life insurance premiums

• Public Provident Fund (PPF)

• Equity Linked Savings Schemes (ELSS)

• Principal repayment of home loans

• Tuition fees for children’s education

Section 80CCC

This section allows deductions for investments made in pension or annuity plans offered by insurance companies. It encourages retirement planning, with deductions included within the overall ₹1.5 lakh limit under Section 80C.

Section 80CCD(1)

Section 80CCD(1) provides deductions for contributions made to the National Pension System (NPS). Salaried individuals can claim deductions of up to 10% of salary, subject to the overall ₹1.5 lakh limit under Sections 80C, 80CCC, and 80CCD(1).

Section 80CCD(1B): Additional NPS Deduction

Section 80CCD(1B) offers an additional deduction of up to ₹50,000 for contributions made to the National Pension System. This benefit is over and above the ₹1.5 lakh limit, making it an effective tool for further reducing taxable income while building retirement savings.

Interest on Home Loan – Section 24

Taxpayers who have taken a home loan can claim deductions on the interest paid under Section 24:

• Up to ₹2 lakh per year for self-occupied properties

• No upper limit for interest deduction on rented properties

This provision can result in substantial tax savings for homeowners.

Section 80E: Deduction on Education Loan Interest

Section 80E allows individuals to claim deductions on interest paid on education loans taken for higher studies for themselves, their spouse, or their children.

Key features:

• Loan must be from a bank or recognized financial institution

• No upper limit on the amount of interest deductible

• Deduction applies only to the interest component, not the principal

This benefit promotes higher education by easing the tax burden on education loans.

Section 80G: Deduction for Donations

Donations made to approved charitable institutions qualify for deductions under Section 80G. Depending on the organization, 50% or 100% of the donated amount may be eligible for deduction.

To claim this benefit:

• Donations should be made via cheque or digital modes

• Cash donations exceeding ₹2,000 are not eligible for deduction

Section 80EE: Additional Home Loan Interest Deduction

Section 80EE provides an additional deduction of up to ₹50,000 on home loan interest, over and above the deduction available under Section 24.

Eligibility conditions include:

• The taxpayer must be a first-time homebuyer

• No ownership of any other residential property at the time of loan sanction

• Home loan amount should not exceed ₹35 lakh

• Property value must not exceed ₹50 lakh

This provision supports affordable housing and encourages first-time homeownership.