6 Ways to Save Income Tax On OLD & New Tax Regime for FY 2023-24

Navigating the complexities of income tax can be daunting, especially with the introduction of new tax regimes. Whether you opt for the new or old tax regime, there are several strategies you can employ to minimize your tax liability. Here are six effective ways to save on income tax for the financial year 2023-24.

1. Maximize Section 80C Deductions

Under the old tax regime, you can claim deductions up to ₹1.5 lakh under Section 80C. Investments in PPF, EPF, NSC, ELSS, and life insurance premiums are some of the popular options.

Example: If you invest ₹1 lakh in PPF and ₹50,000 in ELSS, you can claim the entire ₹1.5 lakh deduction under Section 80C, reducing your taxable income by this amount.

2. Utilize Section 80D for Health Insurance

Both regimes allow deductions for health insurance premiums under Section 80D. You can claim up to ₹25,000 for yourself, spouse, and children, and an additional ₹25,000 for parents under 60 years. For senior citizen parents, the deduction limit is ₹50,000.

Example: If you pay ₹20,000 for your family’s health insurance and ₹30,000 for your senior citizen parents’ insurance, you can claim a total deduction of ₹50,000 under Section 80D.

3. Claim House Rent Allowance (HRA)

If you live in a rented house, you can claim HRA under the old tax regime. Ensure you have rent receipts and a rental agreement to support your claim.

Example: If your basic salary is ₹50,000 per month and you pay ₹15,000 as rent, you can claim HRA based on the least of the following:

Actual HRA received
50% of salary (for metro cities) or 40% (for non-metro cities)
Rent paid minus 10% of salary

4. Leverage Home Loan Interest Deduction

Under Section 24(b), you can claim a deduction of up to ₹2 lakh on home loan interest for a self-occupied property in the old tax regime.

Example: If you pay ₹2.5 lakh as interest on your home loan, you can claim a deduction of ₹2 lakh under Section 24(b), reducing your taxable income by this amount.

5. Take Advantage of Standard Deduction

The standard deduction of ₹50,000 is available to salaried individuals and pensioners in both regimes. This automatic deduction reduces your taxable income, providing some relief regardless of the regime you choose.

Example: If your salary is ₹10 lakh per annum, you can claim a standard deduction of ₹50,000, reducing your taxable income to ₹9.5 lakh.

6. Consider Tax-Saving Fixed Deposits

Tax-saving fixed deposits with a tenure of 5 years qualify for deductions under Section 80C in the old tax regime. While the interest earned is taxable, the initial investment helps reduce your taxable income.

Example: If you invest ₹1.5 lakh in a tax-saving fixed deposit, you can claim this amount as a deduction under Section 80C, reducing your taxable income by ₹1.5 lakh.

Conclusion

Choosing between the new and old tax regimes depends on your financial situation and tax-saving goals. Evaluate the benefits of each regime and utilize the available deductions and exemptions to optimize your tax savings for FY 2023-24. Consulting with a tax advisor can also provide personalized insights tailored to your needs.

6 Ways to Save Income Tax On OLD & New Tax Regime for FY 2023-24