Investment options that will save tax – The ultimate guide for 2023-24
Following are the key income tax changes in the union budget 2023
1. Income Tax Rebate limit change from INR 5 lakhs to 7 lakhs per month for the new regime: Previously, under the new tax regime, only those with an annual income of 5 lakhs could enjoy tax-free benefits. Now, this limit has been increased from 5 to 7 lakhs in the new tax regime. This means individuals with an annual income of up to 7 lakhs do not have to pay any tax.
2. Revision of tax slabs under the new regime: The minimum tax exemption limit has been increased from INR 2.5 lakh to 3 lakhs per annum under the new regime and the total number of income slabs has also been reduced from 6 to 5. Here is a tabular representation of the same.
3. Standard Deduction Benefits extended to the new regime: The benefits of the standard deduction to the new tax regime is now introduced Rs 50,000. Earlier this was not covered.
4. Highest surcharge reduce for new tax regime : The highest surcharge limit which was 37% is now reduce to 25%, and this option is available only to those employee who opts for New Tax Regime.
5. Leave encashment limits on retirement increased: The tax exemption limit for leave encashment salaried individuals has been Rs 3 Lakh, now this limit has been increased to 25 Lakhs.
Income Tax slabs rates
| Taxable Income Slab | New Tax Regime |
|---|---|
| Upto 3 Lakhs | NIL |
| 3 Lakhs to 6 Lakhs | 5% |
| 6 Lakhs to 9 Lakhs | 10% |
| 9 Lakhs to 12 Lakhs | 15% |
| 12 Lakhs to 15 Lakhs | 20% |
| Above 15 Lakhs | 30% |
*For those employees with taxable income less than Rs 5 lakhs, a rebate of Rs 12,500 will continue to apply. For those with a taxable income greater than Rs 5.0 Lakhs, this rebate will not apply, and 5 % tax rate will apply for income between 2.5 to 5.0 Lakhs
Income Tax slabs rates for FY 2023-24
Old Tax Regime
| Taxable Income Slab | Old Tax Regime |
|---|---|
| Upto 2.5 Lakhs | NIL |
| 2.5 Lakhs to 5 Lakhs | 5% |
| 5 Lakhs to 10 Lakhs | 20% |
| 10 Lakhs and above | 30% |
*Under Old tax regime income upto 5 lakhs, a rebate of Rs 12,500 will continue to apply. For those with a taxable income greater than Rs 5.0 Lakhs, this rebate will not apply
New Tax Regime
| Taxable Income Slab | New Tax Regime |
|---|---|
| Upto 3 Lakhs | NIL |
| 3 Lakhs to 6 Lakhs | 5% |
| 6 Lakhs to 9 Lakhs | 10% |
| 9 Lakhs to 12 Lakhs | 15% |
| 12 Lakhs to 15 Lakhs | 20% |
| Above 15 Lakhs | 30% |
*Under New tax regime income upto Rs 7 lakhs, a rebate of Rs 25,000 will be applicable from 1st April 2023. For those above Rs 7 lakhs this rebate will not apply.
Investment Guideline followed as per New Tax Regime
| Sr.No | Particulars | Eligibility / Coverage | Amount of deduction | Proofs to be submitted during actual submission |
|---|---|---|---|---|
| 1 | Deduction in respect of contribution to pension scheme of Central Government – u/s 80CCD (2) | Tax deductions for contribution to the pension schemes notified by Central Government, National Pension Scheme (NPS) | The amount of deduction cannot exceed 10% of Basic amount | Since this is employer contribution no proof is required. |
Investment Guideline followed as per OLD Tax Regime
Are too many deductions in your salary eating into your take-home package? If you’re looking for investment options that will save tax while and make sure you’re invested wisely, then this guide is for you.
The table below contains a list of 32 investment options that will reduce your taxable income and in turn the tax you pay. You may choose a combination that works best for you.
What are the points to consider while submitting Employee Investments Declaration for a current financial year:
1. Employees can claim income tax benefits under 80G Donation through ‘Personal Income Tax filings’. The company won’t allow any benefit for 80G in the Income Tax deduction.
2. For getting benefit under HRA Exemption employee need to provide proper supporting as listed below at, or else HRA exemption benefit won’t be considered;
a) Original monthly rent receipts with revenue stamp affixed.
b) Copy of leave and license agreement, this agreement should be notarized or registered. Ensure to submit the agreement for a financial year. If the agreement period if for 11 months say from July 2021 to May 2022, then the employee will get HRA exemption benefit from April 2022 to May 2022 period. For getting HRA exemption tax benefit from June 2022 to March’2023, the employee needs to submit the rent agreement for the said period too.
c) Those paying rent amount more than Rs.8,333/- pm or Rs 1 lakh annually, need to furnish a copy of their landlord’s permanent account number (PAN), along with the rent receipts and agreement copy. Else If not provided, will not be eligible for HRA exemption.
d) For paying rent over and above Rs.50,000 per month, Form 26QC is mandatory to provide as tax deducting proof.
| Sr.No | Particulars | Eligibility / Coverage | Amount of deduction | Proofs to be submitted during actual submission |
|---|---|---|---|---|
| 1 | Life Insurance Premium – u/s 80C | Premium paid on life of self, spouse, children (Including minor / major / married / unmarried children). | Actual amount paid, subject to max. 1.5 lac and premium should not exceed 10% of sum assured. | Copy of receipt for the premium paid during the current F.Y. 2023-24. In case if the due date is of Mar’2023, then last year copy can be attached for reference’s. |
| 2 | Public Provident Fund – u/s 80C | Amount deposited in Public Provident Fund account in the name of self, spouse, children (Including minor / major / married / unmarried children). | Actual amount deposited, subject to max . 1.5 Lac | 1. Copy of payment challan for the F.Y.2023-24.2. Copy of first page and transaction page of PPF account pass book or Bank Statement. |
| 3 | National Saving Certificate – u/s 80C | Subscription to National Saving Certificate – VIII issue. | Actual amount subscription subject to max. 1.5 Lac. | Copy of national saving certificate for F.Y 2023-24. |
| 4 | Unit-linked Insurance Plan (ULIP) – u/s 80C | Premium paid on life of self, spouse, children (Including minor / major / married / unmarried children). | Contribution paid for participation in Scheme, subject to max. 1.5 Lac. | Copy of Receipts / Proof of amount paid during F.Y. 2023-24. |
| 5 | Equity Linked Saving Schemes(ELSS) – u/s 80C | 1. Amount deposited in equity linked saving scheme of mutual fund.2. The scheme should be approved by Central Government. | Amount invested in equity linked tax saving scheme of mutual fund, subject to max. 1.5 Lac. | 1.Copy of receipts / Proof of amount paid F.Y. 2023-24.2. Tax benefit will be applicable only where its mentioned as ‘Tax Saver Plan’ |
| 6 | Tuition Fees – u/s 80C | 1. Amount paid for the purpose of full time education of any two children.2. It does not include – development fees, donation or payment of similar nature.3. Payment should be made to school, college, university or educational institution situated within India.4. Allowed Admission fees, Exam fees, Computer class fees, Practical fees, Smart class fees.5. No deduction is available for fees paid for private tuition’s , coaching classes, admission in professional courses or any other type of courses. | Actual amount paid subject to max. 1.5 Lac. | 1. Copy receipts of tuition fees (with the address) issued by the school, college, university or educational institution.2. All the receipts should belongs to F.Y.2023-24 |
| 7 | Term Deposit (FD) for 5 years or more with banks – u/s 80C | 1. Amount deposited in Fixed Deposit with the scheduled bank in accordance with Scheme framed by Central Government.2. Amount should be deposited for a fixed period of not less than five years. | Actual amount deposited subject to max. 1.5 Lac. | Copy of the receipt of amount deposited for F.Y.2023-24 |
| 8 | Re-payment of Housing Loan Principal/Registration cost – u/s 80C | 1. Repayment of capital borrowed from any financial institution for acquisition / construction of a self occupied property.2. Also, include payment of stamp duty, registration fees and other cost of transfer of property.3. It does not include cost of shares, initial deposit and cost of renovation, alteration or repairs of the house. | Actual amount paid subject to max. 1.5 Lac. | 1. Copy of Certificate issued by the financial institution certifying re-payment of capital borrowed for FY 2023-242. In case of co-borrower of the capital, Undertaking should be given for availing benefit of whole amount re-paid.(50% deduction will be given to loans with Joint holders in the absence of suitable undertaking.3. Copy of Flat Agreement for availing benefit of Stamp duty & Registration cost4. Lender Bank Name and Lender PAN number is compulsory wef FY 2016-17. Without this details your Interest on housing loan will be disallowed.(This details need to be filled in Investment declaration form). |
| 9 | Interest accrued in respect of NSC VIII issue – u/s 80C | Amount gained in respect of interest accumulated against saving under NSC scheme. | Subject to max. 1.5 Lac. | 1. Copy of national saving certificate taken during previous financial year.2. Statement of accrued interest calculation. |
| 10 | Post Office Savings Bank (CTD) – u/s 80C | 1. Amount deposited in an account under Post Office Time Deposit Rules, 1981.2. The account should be with Post Office for a period of five years. | Actual amount deposited subject to max. 1.5 Lac. | Copy receipts / copy of certificate or pass-book showing amount paid during F.Y.2023-24. |
| 11 | Pension fund set up by any Mutual Fund – u/s 80C | 1. Contribution to any pension fund set up by any Mutual Fund.2. The fund should be approved by Central Government. | Amount contributed to the fund, subject to max. 1.5 Lac. | Photocopy of account statement showing the units purchased in the name of employee during F.Y.2023-24. |
| 12 | Deposit scheme of National Housing Bank (NHB) – u/s 80C | Subscription to bonds issued by NABARD as notified by the Central Government. | Actual amount deposited subject to max. 1.5 Lac. | Copy of the certificate issued by the notified authority for F.Y.2023-24 |
| 13 | Approved Superannuation Fund – u/s 80C | You can confirm from your employer whether your superannuation fund is approved or not. Tax exemptions are available only to approved superannuation funds. | Subject to max. 1.5 Lac. | Copy of policy and sum approved by concern officer |
| 14 | Contribution to Pension Fund – Insurer(80CCC) -u/s 80C | Amount paid or deposited to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other approved insurer for receiving pension. | Actual amount paid, subject to max. 1.5 lac. | Copy of receipt for the amount paid during the current F.Y.2023-24. |
| 15 | Sukanya Samriddhi Scheme New Rules 2016 – u/s 80C | Sukanya Samriddhi Scheme can be opened for biological as well adopted girl child. However, limit of maximum number of account is restricted to one account per girl child and a parent/legal guardian can open account for maximum of two girl child. The age limit of girl should be 10 years or less. | The contribution/payment made towards Sukanya Samriddhi Account will be an eligible deception u/s 80C up to the threshold limit of Rs.1.50 lakhs | 1. Copy of certificate issued by the scheme.2. Payment receipts for F.Y.2023-24 |
| 16 | Deduction in respect of contribution to pension scheme of Central Government – u/s 80CCD | Tax deductions for contribution to the pension schemes notified by Central Government, i.e., a) National Pension Scheme (NPS)b) Atal Pension Yojana (APY) | This extra deduction of Rs. 50,000 on NPS will increase the total deduction allowed under Section 80C and 80CCD of Income Tax Act to Rs. 2 lakh. | Copy of paid receipt with copy of enrolled policy, this should pertain to FY 2023-24 |
| 17 | Medical Insurance Premium –For Spouse and Children – u/s 80D(2)(a) | 1. Medical insurance premium paid to keep in force an insurance on health of self, spouse and dependent children.2. The premium can be paid in any mode other than cash. | 1. Actual amount of premium paid, subject to max. Rs.25,000/-.2. If amount paid for senior citizen, then additional of Rs.25,000/-.3. Can also claim expenses incurred for preventive health check-ups up to Rs. 5,000/-(This deduction of Rs. 5,000 is not in addition to the maximum deduction). | 1. Copy of Premium paid receipt and should pertain to FY 2023-242. Original receipts towards claiming preventive health check-ups. |
| 18 | Medical Ins. Premium –For Parents – u/s 80D(2)(b) | 1. Medical insurance premium paid to keep in force an insurance on health of parents.2. The premium can be paid in any mode other than cash. | 1. Actual amount of premium paid, subject to max. Rs.25,000/-.2. If amount paid for senior citizen, then additional of Rs.25,000/-.3. Can also claim expenses incurred for preventive health check-ups up to Rs. 5,000/-(This deduction of Rs. 5,000 is not in addition to the maximum deduction). | 1. Copy of Premium paid receipt and should pertain to FY 2023-242. Original receipts towards claiming preventive health check-ups. |
| 19 | Medical treatment Expenses on handicapped DependentFor Handicapped Dependent with disability – u/s 80DD | 1. Incurred any expenditure for medical treatment including nursing, training and rehabilitation of a dependent with disability.2. Amount paid or deposited under a scheme framed by LIC or other insurer. | 1. Least of – actual amount paid or deposited or expenses incurred or Rs.75,000/- whichever is less.(Rs.1,25,000/- where the dependent is having severe disability.) | 1. Documents evidencing the payment of expenditure incurred or amount deposited in F.Y.2023-242. Assesse shall have to submit certificate in Form No10-IA from prescribed specialist working in government hospital. |
| 20 | Medical Treatment under specified diseases– u/s 80DDB | For medical treatment of self, spouse, guardians, children, and siblings suffering from specified disease. For example, cancer, chronic renal failure, Parkinson infection, etc. The complete list of such diseases is included in Rule 11DD. | Actual amount paid to the extent of Rs 40,000/-. In case of patient being senior citizen (above 60 years) or very senior citizen (above 80 years) amount of deduction is Rs. 1,00,000/- |
1.Documents evidencing the payment of expenditure incurred or deposited in F.Y 2023-24. 2. Assesse shall have to submit certificate in Form No10-1 from prescribed specialist working in government hospital. |
| 21 | Interest on Education Loan – u/s 80(E) | 1. Any amount paid towards interest on loan taken for higher education during the financial year.2. The loan should be for higher education of self, spouse and children or legal guardian of a student.3. Higher education means full time studies for any course pursued after passing the Senior Secondary Examination or equivalent as recognised by Central / State Government or local authority. | 1. Any amount paid towards interest during F.Y.2023-24.2. It is available only for 8 years starting from the year in which you start repaying the loan. | Copy of Certificate issued by the financial institution certifying payment of interest for FY 2023-24. |
| 22 | Interest on Home Loan – Additional – u/s 80EE | 1. Value of residential house does not exceed Rs 50 Lakhs.2. The loan sanctioned does not exceed Rs. 35 Lakhs.3. The assesse is a first time home buyer.4. The assesse does not own any other residential house as on the date of sanction of the loan. This house should be self occupied property.5. The loan should be sanctioned between 01.04.2016 to 31.03.20176. The benefit of this deduction would be available till the time the repayment of the loan continues. | 1. Actual amount paid towards interest Rs.50,000/- which ever is less.Note : This section has been reintroduced effective FY 2016-17.Now the deduction is allowed up to Rs 50,000 per year starting from FY 2016-17 and subsequent years until the loan is repaid. | 1. Certificate issued by the financial institution certifying payment of interest for FY 2023-24.2. For verification purpose, proof copy of ‘Loan Disbursement Letter’ is mandatory to check if loan is disbursed between 01.04.2016 to 31.03.2017. |
| 23 | Deduction in respect of Interest on loan taken for certain house property (Loan Sancationed between 1st April 2019 to 31st March 2022) – u/s 80EEA | 1. If person eligible u/s 80EE, will not claim benefit under this section.2. Value of residential house does not exceed Rs 45 Lakhs.3. The assesse is a first time home buyer.4. The assesse does not own any other residential house as on the date of sanction of the loan. This house should be self occupied property.5. The loan should be sanctioned between 01.04.2019 to 31.03.2022 | An additional deduction of Rs.1,50,000/- on Interest on housing loan borrowed under affordable housing until 31.03.2022 | 1. Certificate issued by the financial institution certifying payment of interest for FY 2023-24.2. For verification purpose, proof copy of ‘Loan Disbursement Letter’ is mandatory to check if loan is disbursed between 01.04.2019 to 31.03.2022. |
| 24 | Deduction in respect of Interest on loan taken for purchase of electric vehicle (Loan Sancationed between 1st April 2019 to 31st March 2023) – u/s 2. 80EEB | 1. The loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2023.2. “Electric Vehicle” means a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle.3. Applicable for 2 wheeler and 4 wheeler electric vehicle. | Deductions of Rs.1,50,000/- on Interest paid on loans taken to buy electric vehicle. | 1. Vehicle loan certificate issued by the financial institution certifying payment of interest for FY 2023-24. 2. For verification purpose, proof copy of ‘Loan Disbursement Letter’ is mandatory to check if loan is disbursed between 1.4.2019 to 31.3.2023. |
| 25 | Deductions in respect of rents paid – u/s 80GG | 1. The Individual has not been in receipt of any House Rent Allowance from his employer specifically granted to him which qualifies for exemption under sec 10.2. The employee does not own any residential accommodation himself or by his spouse or minor child, at the place where he ordinarily resides or performs duties of his office or carries on his business or profession. | Deduction in respect of house rent paid by him in excess of 10% of his total income, subject to a ceiling of 25% thereof or Rs. 5,000/- per month | 1.Declaration in Form No. 10BA from employee. 2. Rent receipt and rent agreement for the period from 1st April 2023 to 31st March 2024. |
| 26 | Interest Income earned from a savings bank account – u/s 80TTA | 1. Rs.10,000 is tax deductible from the gross income.2.Any interest earned over and above Rs. 10,000 is considered as “Income from Other Sources” and therefore taxable. | Maximum deduction allowed u/s 80TTA is Rs. 10,000. | Copy of Bank Statement or Pass Book for FY 2023-24 |
| 27 | Interest Income earned from a savings bank account – u/s 80TTB | 1. Rs.50,000 is tax saving deduction from the gross taxable income.2.Any interest earned over and above Rs. 50,000 is considered as “Income from Other Sources” and therefore taxable.3. Applicable for Senior Citizen only4. Deduction applicable from 1st April’ 2018 onwards | Maximum deduction allowed u/s 80TTB is Rs. 50,000. | Copy of Saving Bank Statement or Pass Book for FY 2023-24 |
| 28 | Deduction in case of a person with disability – u/s 80U | Deduction in respect of permanent physical disability including blindness to taxpayer | 1. 40% disability RS 75,000/- and2. 80% severe disability Rs 1,25,000/-. | 1. Documents evidencing the payment of expenditure incurred for FY 2023-24.2. Copy of certificate issued by approved medical authority in prescribed form. |
| 29 | Interest on Housing Loan– 24 | 1. Housing Loan should be borrowed by the employee himself.2. Housing Loan should be borrowed for acquisition / construction of a self occupied property.3. The property should not be let out during financial year. | Actual amount paid towards interest on borrowed capital or Rs.2,00,000/- which ever is less. | 1. Certificate issued by the financial institution certifying payment of interest.2. In case of co-borrower of the capital, Undertaking should be given for availing benefit of whole amount paid as interest.(50% deduction will be given to loans with Joint holders in the absence of suitable undertaking.)3. Lender Bank Name and Lender PAN number is compulsory wef FY 2016-17. Without this details your Interest on housing loan will be disallowed.(This details need to be filled in Investment declaration form). |
| 30 | Loss on Housing Property– 24 | A house property which is rented for the whole or a part of the year and there is interest on housing loan deduction, then it is considered as let out house property for income tax purposes. | Actual amount paid towards interest on borrowed capital or Rs 2,oo,ooo/- whichever is less. | 1. Certificate issued by the financial institution certifying payment of interest for FY 2023-24.2. In case of co-borrower of the capital, Undertaking should be given for availing benefit of whole amount paid as interest.(50% deduction will be given to loans with Joint holders in the absence of suitable undertaking.)3. Lender Bank Name and Lender PAN number is compulsory wef FY 2016-17. Without this details your Interest on housing loan will be disallowed.(This details need to be filled in Investment declaration form).4. Self declaration needs to submitted mentioning the details of both the property.5. Copy of Lease agreement for availing rental Income benefit. |
| 31 | Leave Travel Allowance (LTA) | 1. Amount incurred towards cost of travel on self and family.2. Travel should be within India.3. Two journey in block of four consecutive calendar years.4. Family includes spouse, children, parents, brothers and sisters.5. Current block is – 01.01.2023 to 31.12.2026.6. If mode of travel is through road, then A.C. first class rail fare by shortest route or actual amount spent on travel, whichever is less is exempt from tax. | Least of actual expenditure incurred on travel or the amount as per act depending on mode of journey, whichever is less. | 1. Original air ticket or e-Ticket & original boarding pass if journey is by Air travel and should travel in economy class.2. Original rail tickets or e-Ticket, if journey is by rail.3. Original travel agent bill / original petrol bill & original toll tickets if journey is by Road. |
| 32 | House Rent Allowance | 1. Expenditure incurred on payment of rent for residential accommodation.2. For rent paid amount more than Rs.8,333/- pm or Rs 1 lakh annually, for them need to furnish a copy of their landlord’s permanent account number (PAN).3. Individuals paying rent over and above Rs. 50,000 per month, would be mandatorily required to withhold tax. The tenant would also be required to issue a tax withholding certificate (Form 16C) to the landlord, as a proof that taxes have been deposited in his name. | The entire HRA received is not always fully exempt from tax. The least of the following three will be exempt from tax:i) Actual HRA received through monthly salary.ii) Actual rent paid minus 10% of basic salary.iii) 50% of basic salary for those living in metro cities & 40% of basic salary for those living in non-metro cities. | 1. Rent receipt and rent agreement for the period from 1st April 2023 to 31st March 2024. This agreement should notarised or registered.2. Those paying rent amount more than Rs.8,333/- pm or Rs 1 lakh annually, need to furnish a copy of their landlord’s permanent account number (PAN), along with the rent receipts. Else if not provided will not be eligible to HRA exemption.4. Copy of Address proof.5. For paying rent over and above Rs.50,000 per month, Form 26QC is mandatory to provide as tax deducting proof. |
Note: DONATIONS can be claimed as a deduction at the time of filing Individual Income Tax return. It cannot be claimed through your Salary Income while computing tax with employer.
We hope you can use the investment options above to plan your investment more efficiently. Here are some additional tips that you can use:
Section 80C
Section 80C is probably the most used set of investment options that people use for tax planning. Invest in any of the following up to a maximum of Rs. 1.5 lacs p.a. each.
1. Life Insurance2. Public Provident Fund3. National Savings Certificate4. Equity Linked Savings Schemes
House Rent Allowance
If you pay rent you should definitely claim its tax benefits. The tax deduction you can claim with HRA is the minimum of the following:
1.Actual HRA received2. Rent Paid in excess of 10% of (Basic + DA)3. 40% or 50% of (Basic + DA) based on class of city