How To Save Income Tax At The Last Minute

These simple things can help you save thousands of rupees but you must act fast while you still have time

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Sheila, 32, works with a media company and has an annual salary of ₹9.5 lakh. She made a further ₹50,000 by freelancing during the year. Her husband is employed with an IT company and the couple has a five-year-old daughter. The family lives in Delhi.

Even though Sheila hasn't done any tax planning in the last year, she can still reduce her tax liability. In fact, she may not even have to pay a single rupee to the taxman. Here's how.

Opt for the old tax structure

There are two tax structures currently. While the new tax regime has a simplified structure and has its own advantages, Sheila should opt for the older system. It will allow her to optimise tax deductions and exemptions. If you would like to know which tax regime is suited to you, you can check our tax calculator at www.vro.in/tax-calculator/. Sheila's tax calculations under the old and new regimes are given in the table 'Old is gold'.

Here is how the old tax system reduces Sheila's tax liability by 26 per cent.

Standard deduction of 50,000: Available to all. No need to present any documents for this.
House rent allowance (HRA): Sheila's annual basic salary (₹4.75 lakh in this case, which is 50 per cent of her CTC) includes an HRA of ₹2.38 lakh. Based on the criteria (see the table 'Sheila's HRA calculation'), she can claim a deduction of about ₹1.93 lakh. She'll need to submit her copies of rent receipts, the rent agreement and the landlord's PAN to claim this deduction.