How To Save Tax

Here are some tips for smart tax planning in 2020

- Naveen Kumar

You work hard to earn every penny. So, it makes perfect sense to do some smart tax planning to prevent any leakage. Income-tax laws allow many exemptions and deductions on expenses and investments that can help you save a substantial chunk of this outflow. As we move closer to the end of financial year 2019/20, most taxpayers are busy doing their bit to maximize tax savings. Here are some of the most significant options to save tax.

Expenses

House Rent Allowance: If you live in a rented accommodation, you can save a good amount of tax through HRA exemption. If you receive HRA as part of the salary, you can claim this exemption under Section 10 (13A). If you live in a metro city, the maximum exemption is 50 per cent of basic salary and dearness allowance; else, it is 40 per cent. The HRA exemption that you can claim is the least of the HRA received or rent paid or excess rent paid over and above the 10 per cent basic salary and dearness allowance. In case you do not receive HRA from your employer or are self-employed, you can claim deduction up to ₹60,000 in a financial year under Section 80GG.

Home Loan Interest and Principal: If you have taken a home loan for buying or constructing a house, you can claim deduction on both interest and principal payments. The maximum interest that you can claim as a deduction in a given financial year is 2 lakh under Section 24b. However, this comes down to ₹30,000 annually if the property is not constructed within five years. This deduction is available even if the property is let-out. If you bought the property between April 1, 2016 and March 31, 2017, you can claim an additional deduction on interest payment up to ₹50,000 a year. However, to claim this deduction, the home loan amount should not be more than ₹35 lakh and property price should not be more than ₹50 lakh.