6 Income Tax Saving Tips for Individuals | A Complete Guide to Minimizing Tax Liability in 2020
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6 Income Tax Saving Tips for Individuals | A Complete Guide to Minimizing Tax Liability in 2020

Receiving a salary every month is far more enjoyable than paying taxes on it. However, you will be surprised to know that two people with the same salary structure land up paying a different tax amount. That is because only one of them is following the right “TAX PLANNING” to save tax in 2020 and beyond.

How To Save Tax in 2020?

If you are not aware of the available tax planning tricks & strategies, you will end up paying more taxes which will increase the financial burden on you. Avoid the last-minute tax filing rush.

expenses and investments to save tax

Instead, plan your taxes NOW and get your TDS deducted at much lower amounts by your employer.

In this blog, we will discuss all the best tax planning tricks & strategies including all the major benefits as bifurcated in the section given below:

Table of Contents

  1. House-related Expenses
  2. Education-related Expenses
  3. Medical Expenses
  4. Donations
  5. Tax Saving Investments
  6. Other tax-saving benefits

The following are 6 income tax saving tips for individuals | A complete guide to minimizing tax liability in 2020.

1. House Related Expenses

These may be valid in two scenarios. You may be living in a rented home or taken a home loan for the purchase of your own home.

House Related Expenses for income tax exemption

A. House Rent Allowance Exemption

Check your salary slip to find out whether you are receiving House Rent Allowance (HRA). In case you are currently paying rent, then you can claim HRA. Submit your rent receipts to your employer – you can create & generate rent receipts from here. The exemption is calculated as given below:

    • HRA received
    • Rent paid – 10% of salary (Basic salary + DA)
    • 40%(non-metro cities)/50%(metro cities) of salary (Basic salary + DA)

(Whichever is lower)

You can calculate the HRA exemption using this calculator.

B. Section 80GG (If HRA is not a part of the salary)

In case your salary structure does not include an HRA component, no need to worry. You can still claim rent payments deduction under this section which is given below:

    • Rent paid – 10% of adjusted total income
    • 25% of the adjusted total income
    • 5,000/- per month

(Whichever is lower)

C. Interest on home loan [Section 24, 80EE & 80EEA]

In case you are a homeowner for which you had taken a home loan, you are eligible to claim deduction on the interest of the home loan.

  • Section 24

Under house property income, you can claim exemption of interest on a home loan up to Rs. 2,00,000/-.

Now the next question that may come in your mind is “What evidence do I need to submit to my employer for this exemption”? Well, your bank will provide you with a provisional interest certificate that you can submit to your employer.

In case your interest payment is more than Rs. 2,00,000/-, you can still claim deduction u/s 80EE or 80EEA.s

  • Section 80EE

You can claim a deduction on the interest of a home loan under this section as well, which is over & above Rs. 2,00,000/-.

The maximum deduction available under this section is Rs. 50,000/- subject to the following conditions:

    • The value of the house should be up to Rs. 50 lakhs
    • The loan amount should not exceed Rs. 35 lakhs
    • The loan must be sanctioned between 01-April-2016 to 31-March-2017
  • Section 80EEA

This new section was introduced in the 2019 Budget to further extend the benefit under 80EE. Under this section, you can claim a maximum deduction of Rs. 1,50,000/- subject to the below conditions:

    • Stamp duty value should be up to Rs. 45 lakhs
    • The loan must be sanctioned between 01-April-2019 to 31-March-2020

The taxpayer must not own any residential house property on the date of the loan.

Total interest on the home loan Loan sanctioned Deduction u/s 24 Deduction u/s 80EE Deduction u/s 80EEA
2,75,000 During F.Y. 16-17 2,00,000 25,000 Nil
3,00,000 During F.Y. 19-20 2,00,000 Nil 1,00,000
1,50,000 During F.Y. 19-20 1,50,000 Nil Nil
3,75,000 During F.Y. 19-20 2,00,000 Nil 1,50,000

D. Deduction of principal repayment of home loan [Section 80C]

If you have taken a home loan, your EMI will include a principal repayment as well for which you can claim deduction u/s 80C. The overall limit under this section is Rs.1,50,000/-


2. Education Expenditures

There are certain kinds of expenditures related to education for which deduction can be claimed.

Education Expenses that qualify for saving taxes

Section 80E

If you have taken a higher education loan then you can claim the deduction on interest payment of the loan. A loan can be taken for yourself, your wife or for any children whom you are a legal guardian. There is no maximum limit to claim deduction under this section, any amount of interest payment is allowed to be claimed as a deduction for 8 years.

Also, a loan can be taken from any bank or financial institution.

To claim this deduction, submit the bank interest statement to your employer.

Section 80C (Principal Repayment)

If you are paying tuition fees for your children then you can claim a deduction for the same under 80C. The overall limit u/s 80C is Rs. 1,50,000/-. Tuition fees deduction is allowed for a maximum of two children only. You can submit the tuition fees receipt as evidence to your employer.

Education & Hostel Allowance

In case your salary slip has a component for Education & Hostel Allowance, you can claim an exemption for the same. For education allowance, an exemption of Rs. 100/- per month per child is allowed for a maximum of two children. For hostel allowance, an exemption of Rs. 300/- per month per child is available for a maximum of two children


3. Medical Expenses

Medical Expenditures

Section 80D

If you have made a payment for health insurance of yourself, your spouse, your dependent children or your parents then you are eligible for this deduction. Also, if you have incurred medical expenses for the above-mentioned person or they are senior citizens then also you can claim a deduction under this section.

The maximum deduction available under this section is given below:

Particulars Amount 
For Self & Family (Not senior citizen)

For Parents (Not senior citizens)

Rs. 25,000/-

Rs. 25,000/-

For Self & Family (senior citizen)

For Parent (senior citizen)

Rs. 50,000/-

Rs. 50,000/-

Section 80DD

Any expenditure incurred on the medical treatment of a differently-abled dependent relative allows you to claim a flat deduction irrespective of the actual expenditure as given below:

Particulars Amount 
Disability is 40% or more but less than 80% Rs. 75,000/-
Disability is 80% or more (Severe Disability) Rs. 1,25,000/-

Section 80DDB

For any expenditure incurred on the medical treatment of a specified disease on self or dependent relatives, a maximum deduction of Rs. 40,000/- is available. In the case of senior citizens, a maximum deduction of Rs. 1,00,000/- is available, subject to the actual expenditure.

Section 80U

This deduction is for self if the person is suffering from a disability. Under this section, a flat deduction is given irrespective of the actual expenditure. However, you cannot claim deduction u/s 80DD or section 80U simultaneously. Given below is the deduction available under this section:

Particulars Amount 
Disability is 40% or more but less than 80% Rs. 75,000/-
Disability is 80% or more (Severe Disability) Rs. 1,25,000/-

4. Donations

If you have made any donations towards specified institutions then you can get a deduction for the same.

Donations

Section 80G

Any donation made by a taxpayer to certain specified organizations or charitable institutions can be claimed here. Deduction under this section is available up to either 100% or 50% with or without restriction. Donation above Rs. 2,000 is not allowed in cash. You can submit donation receipts to your employer.

Section 80GGC

if you have given any donations to registered political parties then you can claim a deduction under this section. Any amount of donation is allowable as deduction provided the donation is not made in cash.


5. Tax Saving Investments

There are many investment options available to you but you should wisely choose the investment option which provides high returns as well as high tax savings in 2020.

Investment option u/s 80C

Under section 80C, there is a list of investment options for which you can claim the deduction. The overall limit of deduction under this section is Rs. 1,50,000 and given below are the investment options:

  • Notified units of mutual Funds
  • Notified pension scheme of Mutual Funds or UTI
  • Fixed Deposit in a scheduled bank or post office for 5 years or more
  • Deposit in Sukanya Samriddhi Scheme
  • Contribution towards Unit Linked Insurance Plan
  • Deposit in Senior Citizen saving scheme
  • Contribution towards statutory or recognized provident fund
  • The amount deposited in public Provident Fund (PPF)
  • The amount deposited in NSC
  • Premium paid on Life Insurance

Also Read: Best Tax Saving Investment Options u/s 80C in 2019-20


Section 80CCD(1B)

Any contribution towards the National Pension scheme shall be available for deduction under section 80CCD(1B). The maximum amount of deduction available under this section is Rs. 50,000/-.


6. Other Tax-saving Benefits

Apart from the expenses discussed above, there are certain expenditures for which you can save tax in 2020. Here are some other tax-saving options:

Standard Deduction

Budget 2018 introduced a flat deduction of Rs. 40,000/- from the salary in place of Transport Allowance & Medical reimbursement. The limit of standard deduction of F.Y. 19-20 was raised to Rs. 50,000/- from Rs. 40,000/-.

80TTA

If you are an individual below the age of 60 then you can claim a deduction of interest on savings account up to Rs. 10,000/-.

80TTB

If you are a resident senior citizen and earning interest on bank deposits (savings or fixed) or interest on post office deposits then you can claim a deduction of the same up to Rs. 50,000/-.

Leave Travel Allowance

If your salary structure has an LTA component then you can claim this exemption subject to the following condition:

  • There is an actual domestic journey during the year
  • The actual amount of travel cost is allowed as exemption which cannot exceed the amount of LTA
  • An exemption is available for self & family members.

You can submit tickets/ fare receipts to your employer as evidence.       


Frequently Asked Questions (FAQs) on How To save Tax in 2020

1. I have not submitted some tax-saving proofs to my employer, can I claim the same at the time of return filing?

In case you have not submitted some tax-saving proofs to your employer, no need to worry, you can claim the deduction of the same at the time of filing your return.

2. Is there any format to submit details of claims & evidence to the employer?

An employee needs to furnish Form 12BB to claim tax benefits on investments & expenses made by the employee.

3. Can I claim HRA exemption & interest on home loans simultaneously?

If there are valid reasons for staying in a rented house even if you have your self-owned house then you can claim the benefits of both together. Let’s say you have to stay in another city due to a job and your owned house is in another city, then you can claim HRA exemption & interest on home loan (if any) together.


–Author Bio–
Abhishek SoniAbhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging start-ups of Asia and authorized ERI by the Income Tax Department.

In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

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