In Budget 2020 has introduced a New Tax System New and Old Tax Regime U/s 115 BAC and also allow the taxpayers to opt-in whether they can get the New Tax Regime or Old Tax Regime U/s 115 BAC for the F.Y.2020-21. Those who willing to opt-in the Old Tax Regime they can get the benefits of Tax Sections and those who willing to opt-in the New Tax Regime they can not get any Tax Benefits as per the Income Tax Act 1961. In this article 6 top tax benefits for the Old Tax Regime for F.Y.2020-21
1. Use HRA Exemption Effectively
HRA (House Rent Allowance), an allowance given with the salary to the government and private employees. This allowance is to meet the expenditure actually incurred on payment of rent. Income Tax Department gives tax benefit on this allowance. It Does not consider the full amount as taxable income.
To avail the utmost tax break on HRA, you ought to keep your HRA 50% of the essential salary and rent paid should be 20% quite of HRA.
2. Purchase a Dream Home by taking home equity credit
As a salaried person, you can enjoy the tax-saving on home loan by purchasing a house. By this manner, you’ll own your dream home and avail the tax break also.
So, if you’ve got taken a home equity credit, you’ll save tax under three sections, viz. 80C, 24 and 80EEA.
Deduction on Repayment of Principal Amount
Out of the home loan EMI, the principal amount is eligible for a tax deduction up to Rs.1.5 lakh u/s 80C. You must have an idea of the principal amount in the EMI. It changes continuously, thus you ought to ask EMI schedule.
Deduction on Interest Paid on Home Loan U/s 24(b)
You can claim the tax deduction of interest paid on home loan u/s 24(b) as well. The limit of this deduction is Rs. 2 lakh for some cases. But, if you have taken the home loan for a property which is not self-occupied, then there is no maximum limit of deduction. Hence, you’ll claim the entire interest amount u/s 24.
3. Ensure Retirement Pension Through the NPS
National Pension Scheme, (NPS) maybe a retirement saving scheme. Any person can invest during this scheme including salaried persons. You have to invest throughout your service period. A part of your contribution also goes to the shares and bonds.
After retirement, you get a lump-sum amount. Some amount is also used to give you a regular pension.
Let us see how you’ll save tax through NPS-
Employees’ contribution in NPS account u/s 80CCD (1)
Your investment in the NPS account is eligible for a tax deduction up to Rs.1.5 lakh.
Employer’s contribution in NPS account u/s 80CCD (2)
The employer’s contribution in your NPS account is also eligible for a tax deduction. But, the total contribution should be 10% of your salary. The limit is 14% for the central government employees.
Additional contribution in NPS account u/s 80CCD (1B)
Besides the above contributions, you’ll deposit an additional amount in your NPS account. And may get a further tax break up to ₹50,000. This deduction is available only if you invest more than the prescribed amount. As you know that Employee has to contribute 10% of their salary. The excess amount is eligible for this deduction.
4. Invest in PPF
The most popular saving scheme of all of the taxpayers in India. The PPF scheme is designed for long term saving. Thus you can use it for your Children’s higher education and marriage as well.
5. Health Insurance for Hassle-free Treatment U/s 80D
Like, Life Insurance, the government gives you the tax deduction benefit on health insurance as well. So, invest in any health scheme for hassle-free treatment and avail the tax break u/s 80D. This section gives you a chance to save tax up to Rs. 1 lakh. Let us see how-
• If you pay a premium against health policy for you and your family (including children), you can claim a deduction of Rs.25,000.
• For dependent parents with your family above 60 years, the limit of deduction enhances up to Rs. 50,000.
• The deduction may be up to Rs. 75,000, if your parents are senior citizens. So, Rs.25,000 for you and your family and extra Rs.50,000 for your parents.
• Moreover, if you and your parents both are senior citizens, you can claim deduction up to Rs. 1 lakh.
6. Use Children Tuition Fees for Tax Deduction
You can save tax by paying the tuition fees of your two children up to Rs.1.5 lakh u/s 80C. Remember this deduction is available for the fee paid to the educational institute from pre-primary to higher education.
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