Tax-saving hacks: If you are planning to file your income tax return this year, this information could be very useful for you. Many taxpayers file their returns but forget to claim deductions, resulting in a higher tax liability. Today, we are highlighting six specific tax deductions that taxpayers often overlook. Please note that if you have opted for the ‘New Tax Regime,’ claiming these deductions may not be possible. Therefore, it is advisable to compare the two tax regimes when filing your return to understand the benefits of each.

Save lakhs in taxes with these schemes

You can invest in various schemes to save on taxes and then easily claim deductions by opting for the ‘Old Tax Regime.’ Currently, there are several government-backed schemes available for investment, such as PPF, NPS, SSY, ELSS, and SCSS. These schemes are highly popular among investors and offer the potential to save lakhs of rupees in taxes.

ELSS (Equity-Linked Savings Scheme)

ELSS stands for Equity-Linked Savings Scheme; it is essentially a type of equity mutual fund. Investing in this fund allows you to build a substantial corpus for the future while also saving lakhs of rupees in taxes. Investments in this scheme come with a lock-in period of three years. Under this scheme, you can avail of tax benefits of up to ₹1.5 lakh under Section 80C of the Income Tax Act. Additionally, returns of up to ₹1 lakh generated from ELSS investments are tax-free.

PPF (Public Provident Fund) Savings Scheme

Regarding the PPF, investors earn interest at a rate of 7.1 per cent. It is one of the most popular schemes among investors. Under this scheme, you can avail a tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. However, the invested funds remain locked in for 15 years; this means there is no provision to withdraw money from the scheme before the 15-year tenure ends.

SSY Scheme

It is worth noting that the SSY scheme is specifically designed for the girl child. You can open an account in the name of a daughter who is under 10 years of age. Taxpayers can save up to ₹1.5 lakh in taxes through this scheme, which offers an interest rate of 8.2%. Apart from saving on taxes, this scheme allows you to accumulate significant savings—amounting to lakhs of rupees—over time.

NPS Savings Scheme

The NPS scheme is primarily designed for retirees. Investors can save up to ₹1.5 lakh in taxes under Section 80C. Additionally, you can avail a tax deduction of up to ₹50,000 under Section 80CCD(1B). You can start investing in the NPS with as little as ₹1,000. Any Indian citizen aged between 18 and 65 years can easily apply for this scheme.

Claim HRA by paying rent to parents

If the house is registered in your parents’ name and you actually pay them rent, you can claim the HRA benefit. However, the arrangement must be genuine, and the rent received by your parents may be considered part of their taxable income.

Investments in parents’ names

If your parents fall into a lower tax bracket, making investments in their names—while keeping valid tax rules and ‘clubbing of income’ provisions in mind—can be a part of your tax planning strategy. Difference Between Tax Planning and Tax Evasion
Tax planning involves reducing your tax liability by utilising all valid exemptions and deductions available under income tax laws. In contrast, concealing income, submitting fake bills, providing incorrect information, or claiming fictitious investments falls under the category of tax evasion; this is a legal offence that can lead to penalties or legal action.

Which tax regime is better for you?

This depends on your financial situation. If you have significant deductions—such as those for Section 80C investments, health insurance, HRA, home loans, and NPS—alongside your income, the old tax regime may prove beneficial. Conversely, if you have fewer investments and prefer a simpler tax system, the new tax regime could be a better option.

Conclusion

There are several legal avenues available in India to save on income tax. Under the old tax regime, tax savings can be achieved by utilising provisions such as Sections 80C, 80D, and 24(b), as well as HRA and NPS. Meanwhile, the new tax regime offers benefits like lower tax rates, a standard deduction of ₹75,000, and deductions for employer contributions to NPS. Ultimately, tax planning is beneficial only when it complies with income tax laws. Proper tax planning is not merely a means to save tax; it also serves as a way to build your savings.