‘The hardest thing in the world to understand is the Income Tax.’ – Albert Einstein

But don’t worry as I, your own CFO (Apna CFO), am here to discuss some avenues to help you save taxes under the old and new tax regimes this tax season.

Tax Saving Tips under the New Tax Regime

Employer’s Contribution to NPS under Section 80CCD(2)

An employer can contribute to the NPS even if they have contributed to the PPF and EPF Funds. The contribution made by the employer may be equal to or higher than the contribution made by the employee.

If you are a central government employee, you can claim a deduction of up to 14% of your employer’s salary (Basic + DA).

However, if you are a non-government employee, you can claim a maximum of 10% of your salary (Basic + DA).

The amount that your employer contributes will be deducted from your employee pay slip and deposited into your NPS account. There is an overall threshold of Rs. 7,50,000 for employer contribution to PF, NPS and Superannuation.

Amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)

The Income Tax Act states that the total amount the applicants and the central government contribute to the Agniveer Corpus Fund will be eligible for deduction under Section 80CCH(2).

The Act also states that an exemption will be allowed if the applicant or the nominees receive such an income under the Agnipath Scheme.

Soldiers enrolled in this scheme will get all the benefits like ration, risk and hardships, travel etc. Death and disability compensation is also available for the candidates.

This deduction is now available under both regimes.

Family Pension Income

Family pension refers to the amount the employer pays to the employee’s family in the event of the employee’s death.

A sum equal to 1/3rd of the income received by the employee or Rs. 15,000, whichever is lower among the two, will be allowed as a deduction under Section 57(iia).

Interest on Home Loan on Let-out Property under Section 24

Under the new tax regime, interest on a home loan for self-occupied property is prohibited under Section 24. Whereas, interest on a home loan on the let-out property is allowed as a deduction without any upper limit.

Transport Allowance and Conveyance Allowance

Transport allowance means the allowance given to the employee by the employer to compensate for the travel expenses incurred for commuting between his place of residence and work.

The exemption allowed is Rs. 1,600 per month and Rs. 3,200 per month for a physically challenged employee commuting from his place of residence to the place of duty.

Conveyance allowance is granted to meet the expenditure incurred during the performance of office duty. However, conveyance allowance is exempt only to the extent of actual expenditure incurred.

Voluntary Retirement Scheme under Section 10(10C)

A voluntary retirement scheme is offered by employers so that employees can retire voluntarily. The amount exempt under this Section is Rs. 5 Lakhs.

Gratuity under Section 10(10)

For individuals who are Government employees, the amount of gratuity received is fully exempt. Whereas, for individuals who are in private employment, the exemption depends on whether they are covered under the Payment of Gratuity Act.

Leave Encashment under Section 10(10AA)

Leave encashment is when the employee encashes all the paid leaves at the time of retirement or resignation. The maximum amount exempt is Rs. 25 Lakhs and the amount exceeding will be taxable.

Tax Saving Tips under the Old Tax Regime

Avail a Home Loan

Availing a home loan is associated with dual benefits, as it comes with reduced tax liability, along with owning a home. Many schemes such as PMAY (Pradhan Mantri Awas Yojana) and DDR (Delhi Development Authority) Housing scheme aim to make housing affordable, while Section 80C and 24(b) reduce monetary liability.

• Deductions of up to Rs. 1.5 Lakh under Section 80C for repayment of principal.
• Interest on home loan deductible up to Rs. 2 Lakh annually under Section 24(b).
• If property is let-out, the entire interest component is deductible.
• Section 24(b) also applies to under-construction property (completed within 5 years).
• First-time homeowners can claim an additional deduction under Section 80EEA.

Claim Exemptions if you live on Rented Premises

Tax exemptions under House Rent Allowance (HRA) are granted under Section 10(13A). If salary does not include HRA, you can still claim deductions under Section 80GG.

Donate to Charity

Donations made to specific organizations in cash are eligible for tax waiver amounting to Rs. 2,000 under Section 80G. Bank transfers enjoy complete or partial exemptions. Donations for scientific research or rural development qualify under Section 80GGA.

Support a Political Party

Donations to political parties or electoral trusts are eligible for full exemption under Section 80GGC, provided the organization is registered under Section 29A of the People Act of 1951.

Buy a Health Insurance Policy

Tax deductions are available under Section 80D for health insurance premium payments:

Investment Options under Section 80C

Section 80C allows deductions up to Rs. 1.5 Lakhs annually. Popular instruments include: