Income Tax Saving Guidelines for Employee's

Summary about this page

Taxes are difficult to avoid, but there are many strategies way to bring down employee tax liability. This article provides an in-depth glance about changes put forward by the Government of India effective 'Budget 2023' along with various tax-saving elements made available under the Income-tax act with, how, and when it should be provided by employee to his employer to save tax deduction from his monthly salary.

INCOME TAX is the tax paid by an individual or a Hindu Undivided Family(HUF) or any taxpayer other than Companies, on the income received. The income tax amount varies with the respective income as per the various Income tax slab. Effective Budget 2023 New Tax Regime will remain default rate. The New Tax Regime is benefited to newcomers who wish not to make any tax savings investments.

Under the Income Tax Act, 1961, there are various methods to save income tax by Individual or HUF or other tax payers. Some of these tax-saving methods are listed below under different Income Tax Act's; this is applicable if opted for OLD Regime only.

1. u/s 10 (Payment of House rent, Leave travel amount, etc)
2. u/s 80 C (LIC, PPF, ELSS, Housing loan principal, Tuition fees, etc)
3. u/s 80 Others (Health Mediclaim, Handicap expenditure, Education Interest repayment, etc)
4. Housing loan repayment, Electric Vehicle Car loan repayment, etc.

For Employee's, what are the changes introduced by Government of India under Income Tax for financial year 2024-25?

Increase in the Income Tax Rebate limit from Rs.5 lakh to Rs.7 lakh under the new tax regime. Currently those with an income of Rs.5 lakh do not pay any income tax, now effective financial year 2023-24 onwards those with an income of Rs.7 lakh will not require to pay any income tax who had opted for new tax regime, but those who had opted for old tax regime their limit will remain 5 lakh.

Earlier the standard deduction limit of Rs.50,000/- was available for those who opted Old Tax Regime. Now it’s proposed to extend this benefit to new tax regime and effective FY 2024-25 onwards the amount is Rs.75,000/-.

The highest surcharge limit which was 37% is now reduce to 25%, and this option is available only to those employee who choose New Tax Regime.

The leave exemption limit is now increased from Rs.3 lakh to Rs.25 lakh.

1. Income tax slab for Financial Year 2024-25

For age upto 60 yrs	For FY 2024-25
Normal Citizen	Old tax regime
Income upto 2.5 lacs	NIL
Income from 2.5 lacs to 5 lacs	5%
Income from 5 lacs to 10 lacs	20%
Income from 10 lacs and above	30%

For age 60 yrs to 80 yrs	For FY 2024-25
Senior Citizen	Old tax regime
Income upto 3 lacs	NIL
Income from 3 lacs to 5 lacs	5%
Income from 5 lacs to 10 lacs	20%
Income above 10 lacs	30%

For age above 80 yrs	For FY 2024-25
Very Senior Citizen	Old tax regime
Income upto 5 lacs	NIL
Income from 5 lacs to 10 lacs	20%
Income above 10 lacs	30%

New Tax Regime - Income tax slab for Financial Year 2024-25 (WEF : 1st April 2024)

Income Slabs FY 2024-25	Tax Rates
Income upto 3 lacs	NIL
Income from 3 lacs to 7 lacs	5%
Income from 7 lacs to 10 lacs	10%
Income from 10 lacs to 12 lacs	15%
Income from 12 lacs to 15 lacs	20%
Income from 15 lacs and above	30%

*The New tax regime will be standard for all age groups, i.e.'Normal Citizen', 'Senior Citizen' & 'Very Senior Citizen'.

2. No more exemptions and deduction will be allowed if the tax payer opts for the new tax Regime

1. Section 10 exemptions like House Rent paid, LTA
2. 80C (PF, PPF, LIC, ELSS, Housing Loan Repayment, etc)
3. 80other (80D, 80DD, 80DDB, 80CCD employer contribution, etc) deductions
4. Standard deductions 50K
5. Professional Tax
6. Housing Loan Interest
7. NPS Section 80CCD Self contribution Rs.50k deduction

To access 'Online Income Tax Calculator' with above new changes, and what are changes introduced for new financial year, then Click here

Income tax saving guideline for Employees, for FY 2024-25 are as follows;

When should an employee submit tax saving declaration and actual proof to his employer?

Tax saving declaration has to be done in the beginning of a financial year, when your employer asks you to declare it. Usually this is done in April every year. Investment declaration is important for you because it can lead to higher take home salary. While joining new organisation ensure to submit investment declaration along with previous employer tax computation with new employer.

At the beginning of the financial year, you have to just make an estimate of the investments that you intend to make. You dont need to submit actual proofs until the end of the financial year(March every year). You can actually invest less or more, its up to employee choice. The investments proof submitted does not be exactly what is declared at beginning of financial year. Employee who resign should ensure to submit actual proof to his employer before processing his full and final settlement.

1. List of exemptions claimed u/s 10, HRA and LTA:

House Rent Allowance (HRA) Exemption

Eligibility/Coverage:
1. Expense incurred on rent paid for residential accommodation.
2. If rent paid amount exceed Rs.8,333/- per month or Rs. 1 lacs annually, then name and pan number of landlord is compulsory to furnish.
3. For rent payment over and above Rs. 50,000/- per month, for them mandatorily required to withhold tax. The tenant should fill a Form 26QC electronically which is a challan-cum-statement towards tax payment against which tenant needs to issue a TDS certificate (Form 16C) to the landlord as proof of taxes deducted.

Amount of deduction:
The HRA amount received in monthly salary is not always fully exempt from tax. The least of the following three will be exempt from tax:
1. Actual HRA received through monthly salary.
2. Actual rent paid minus 10% of basic salary.
3. 50% of basic salary for those living in metro cities & 40% of basic salary for those living in non-metro cities.
Access online HRA Exemption calculator : Click here

What proof to submit:
1. Rent receipts with revenue stamp affixed,
2. Copy of leave and license agreement,
3. Those paying rent amount more than Rs.8,333/- pm or Rs 1 lacs annually, need to furnish a copy of their landlord's permanent account number, along with the rent receipts.
4. For rent paid over Rs.50,000/- per month, Form 26QC is mandatory to provide as tax deducting proof.

Leave Travel Allowance (LTA) Exemption

Eligibility/Coverage:
1. Amount incurred towards cost of travel on self and family.
2. Only domestic travel allowed, within India.
3. Two journey in block of four consecutive calendar years.
4. Family should includes spouse, children, parents, brothers and sisters.
5. Current LTA block is - 01st January 2022 to 31st December 2025.
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.

Amount of deduction:
The amount of LTA exemption depends on the LTA component in your salary package or CTC. You can furnish proofs of travel within the block period and claim up to the amount prescribed in your CTC.

What proof to submit:
1. Air ticket or e-Ticket along with original boarding pass if journey is by Air travel.
2. 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.

2. List of deductions claimed u/s 80C (Maximum limit under this section will be Rs 1.5 lac)

Click on the buttons inside the tab menu:..........Last updated on 01/06/2024

Life Insurance Premium

Under Section	80C
Eligibility/ Coverage	Premium paid on life of self, spouse and children
Amount of deduction	Actual amount paid, subject to max. 1.5 lac and premium should not exceed 10% of sum assured
What proof to submit	Copy of LIC premium receipt paid in current financial year. In case if payment is due in March month, then copy of last year can be attached as a reference.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Public Provident Fund

Under Section	80C
Eligibility/ Coverage	Amount deposited in Public Provident Fund account in the name of self, spouse, children (Including minor / major / married / unmarried children)
Amount of deduction	Actual amount deposited, subject to max Rs. 1.5 Lac
What proof to submit	Copy of payment proof for Current financial year and copy of first page and transaction page of PPF account pass book or Bank statement
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

National Saving Certificate

Under Section	80C
Eligibility/ Coverage	Subscription to National Saving Certificate - VIII issue.
Amount of deduction	Actual amount deposited, subject to max Rs. 1.5 Lac
What proof to submit	Copy of National Saving Certificate for Current financial year
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Unit-linked Insurance Plan -ULIP

Under Section	80C
Eligibility/ Coverage	Premium paid on life of self, spouse, children (Including minor / major / married / unmarried children)
Amount of deduction	Contribution paid for participation in Scheme, subject to maximum Rs. 1.5 Lac
What proof to submit	Copy of paid receipts for Current financial year
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Equity Linked Saving Scheme - ELSS

Under Section	80C
Eligibility/ Coverage	Amount deposited in ELSS mutual fund. The scheme should be approved by Central Government
Amount of deduction	Amount invested in ELSS mutual fund, subject to maximum Rs. 1.5 Lac
What proof to submit	Copy of payment receipts for current financial year. Tax benefit will be applicable only when its mentioned as 'Tax Saver Plan
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Tuition Fees

Under Section	80C
Eligibility/ Coverage	1. Amount paid for the purpose of full time education of any two children, dose not include development fees, donation or payment of similar nature 2. Payment should be made to school, college, university or educational institution situated within India 3. Allowed Admission fees, Exam fees, Computer class fees, Practical fees, Smart class fees 4. Fees paid for private tuition’s, coaching classes, admission in professional courses is not eligible.
Amount of deduction	Actual amount paid subject to maximum Rs. 1.5 Lac
What proof to submit	Copy of tuition fees receipt issued by the school, college, university or educational institution. The receipts should be for current financial year
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Term Deposit - 5 years

Under Section	80C
Eligibility/ Coverage	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 3. Deposite should belong to self and spouse
Amount of deduction	Actual amount paid subject to maximum Rs. 1.5 Lac
What proof to submit	Copy of fixed deposite receipt should belongs to current financial year
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Re-payment of Housing Loan Principal

Under Section	80C
Eligibility/ Coverage	1. Repayment of capital borrowed from any financial institution for acquisition/construction of a self occupied property. 2. 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.
Amount of deduction	Actual amount paid subject to maximum Rs. 1.5 Lac
What proof to submit	1. Copy of Certificate issued by the financial institution certifying re-payment of loan. 2. In case of co-borrower , declaration should be given for availing benefit of whole amount re-paid. 3. Copy of Flat Agreement for availing benefit of Stamp duty & Registration cost. 4. Lender Bank Name and Lender PAN number is compulsory effective financial year 2016-17.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Accrued Interest on NSC

Under Section	80C
Eligibility/ Coverage	Amount gained in respect of interest accumulated against saving under NSC scheme.
Amount of deduction	Subject to maximum of Rs. 1.5 Lac
What proof to submit	1. Copy of NSC certificate taken during previous financial year. 2. Statement of accrued interest calculation.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Post Office Savings Bank

Under Section	80C
Eligibility/ Coverage	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.
Amount of deduction	Actual amount deposited subject to maximum of Rs. 1.5 Lac
What proof to submit	Copy receipts/copy of certificate or pass-book
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Contribution to Pension Fund

Under Section	80CCC
Eligibility/ Coverage	An individual who has subscribed to an annuity pension plan which has been offered by an approved insurance company.
Amount of deduction	Actual amount deposited subject to maximum of Rs. 1.5 Lac
What proof to submit	Copy of receipt for the amount paid during the current year
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Sukanya Samriddhi Scheme

Under Section	80C
Eligibility/ Coverage	Sukanya Samriddhi Scheme should be opted for a 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.
Amount of deduction	Actual amount paid against this scheme subject to maximum of Rs. 1.5 Lac
What proof to submit	Copy of certificate issued against this scheme and payment receipts for current financial year
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

3. List of deductions claimed under 80 Others (80D, 80DD, 80DDB, 80CCD, 80U, 80E, etc)

Click on the buttons inside the tab menu:..........Last updated on 01/04/2024

NPS Contribution

Under Section	80CCD
Eligibility/ Coverage	Contribution to the pension schemes notified by Central Government, i.e., a) National Pension Scheme (NPS) b) Atal Pension Yojana (APY)
Amount of deduction	Additional deduction of Rs. 50,000/- on National pesnion scheme
What proof to submit	Copy of receipt paid in current financial year.
Tax Regime	Benefited for Old Tax regime and for New Tax regime

Medical Insurance Premium - Self, Spouse, Children and Parents

Under Section	80D
Eligibility/ Coverage	1. Mediclaim 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.
Amount of deduction	1. Premium paid, subject to max. Rs.25,000/- for self, spouse and dependent children. 2. If amount paid for parents, then additional Rs.25,000/-. 3. If parents senior citizen then additional Rs.5,000 considered. 4. Also claim expenses incurred for preventive health check-ups up to Rs. 5,000/-(This is not in addition to the maximum deduction).
What proof to submit	Copy of premium paid receipt for current financial year, along with bills towards preventive health check-ups if opted for.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Medical treatment of handicapped Dependent

Under Section	80DD
Eligibility/ Coverage	Expenditure incurred towards medical treatment including nursing, training and rehabilitation of a dependent with disability.
Amount of deduction	Least of actual amount paid or deposited or expenses incurred or Rs.75,000/- whichever is less with noraml disability. Rs.1,25,000/- where the dependent is having severe disability
What proof to submit	Evidence of the payment incurred or amount deposited for current year, along with certificate in Form No10-IA issued by hospital.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Medical Treatment under specified diseases

Under Section	80DDB
Eligibility/ Coverage	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 Income Tax Act, Rule 11DD.
Amount of deduction	Actual amount paid to the extent Rs.40,000/-. Rs.1,00,000/- in case of senior citizen and above.
What proof to submit	Evidence of the payment incurred for current year, along with certificate in Form No10-IA issued by hospital.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Interest on Education Loan

Under Section	80E
Eligibility/ Coverage	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.
Amount of deduction	Amount paid towards interest during financial year. Avail deduction for 8 years starting from the year in which you start repaying the loan.
What proof to submit	Certificate copy issued by the financial institution certifying payment of interest for financial year.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Deductions is respect of Rent paid

Under Section	80GG
Eligibility/ Coverage	1. The Individual has no House Rent Allowance(HRA) component as part of his salary. 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.
Amount of deduction	Deduction in respect of house rent paid in excess of 10% of total income, subject to a ceiling of 25% thereof or Rs. 5,000/- per month.
What proof to submit	Declaration in Form No 10BA from employee for not claiming HRA exemption through salar.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Deduction against Interest earned from Savings Bank account

Under Section	80TTA & 80TTB
Eligibility/ Coverage	It applies to all individuals. Any interest earned should first considerd as “Income from Other Sources” and therefore taxable. Later u/s 80TTA or 80TTB allowed for deduction unto prescribed limit.
Amount of deduction	Maximum deduction allowed u/s 80TTA is Rs. 10,000 and for Senior citizen the limit is Rs. 50,000/- u/s 80TTB
What proof to submit	Copy of Saving Bank Statement or Pass Book for financial yaer.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Deduction in case of self disability

Under Section	80U
Eligibility/ Coverage	Deduction in respect of permanent physical disability including blindness.
Amount of deduction	1. Rs. 75,000/- in case of 40% disability, and 2. Rs. 1,25,000/- in case 80% severe disability.
What proof to submit	Documents of the payment of expenditure incurred or amount deposited along with copy of certificate issued by approved medical authority in prescribed form.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

4. List of Interest deductions claimed under HOUSING Loan and VEHICLE Loan

Click on the buttons inside the tab menu:..........Last updated on 01/04/2024

Interest on Housing Loan

Under Section	Section 24
Eligibility/ Coverage	1. Housing Loan should be borrowed by the Individual 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.
Amount of deduction	Housing loan interest paid towards borrowed capital or Rs.2,00,000/- which ever is minimum.
What proof to submit	1. Housing Loan Certificate issued by the financial institution certifying payment of EMI with principal and Interest paid during the financial year. 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.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Loss on House Property

Under Section	Section 24
Eligibility /Coverage	1. Benefits if individual own's multiple housing property and along with multiple housing loans interest. So multiple interest tax benefit can be availed under this head. 2. The Principal repayment of multiple home loan can clubbed under 'Principal Re-payment of home Loan - u/s 80C'.
Amount of deduction	There was no limit on Interest on home loan on Rented house that was allowed as deduction u/s sec 24 till year 2016-17, but from year 2017 -18 onwards the amount of interest on housing loan on rented house is restricted to the extent to which loss from such house property does not exceed Rs 2,00,000/-
What proof to submit	1. Housing Loan Certificate issued by the financial institution certifying payment of EMI with principal and Interest paid during the financial year. 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. Need to submit self declaration mentioning the details of both property along with rental income received during the year. 4. Lender Bank Name and Lender PAN number is compulsory.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Interest on home loan - Additional (2016-17)

Under Section	80EE
Eligibility/ Coverage	1. The value of residential house does not exceed Rs 50 Lacs, and the loan sanctioned does not exceed Rs. 35 Lakhs. 2. The individual should first time home buyer and does not own any other residential house as on the date of sanction of this loan. This house should be self occupied property. 3. The loan should be sanctioned between 01st April 2016 to 31st March 2017 4. The benefit of this deduction would be available till the time the repayment of the loan continues
Amount of deduction	Excess of actual amount of interest paid above Rs. 2 lacs or Rs.50,000/- which ever is less.
What proof to submit	1. Housing Loan Certificate issued by the financial institution certifying payment of EMI with principal and Interest paid during the financial year. 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. Disbursement letter is mandatory to check if loan is disbursed between 01st April 2016 to 31st March 2017. 4. Lender Bank Name and Lender PAN number is compulsory.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Interest on home loan - Additional (2019-20)

Under Section	80EEA
Eligibility/ Coverage	1. The value of residential house does not exceed Rs 45 Lacs. 2. The individual should first time home buyer and does not own any other residential house as on the date of sanction of this loan. This house should be self occupied property. 3. The loan should be sanctioned between 01st April 2019 to 31st March 2020 4. The benefit of this deduction would be available till the time the repayment of the loan continues
Amount of deduction	Excess of actual amount of interest paid above Rs. 2 lacs or Rs.1,50,000/- which ever is less.
What proof to submit	1. Housing Loan Certificate issued by the financial institution certifying payment of EMI with principal and Interest paid during the financial year. 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. Disbursement letter is mandatory to check if loan is disbursed between 01st April 2019 to 31st March 2020. 4. Lender Bank Name and Lender PAN number is compulsory.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered

Interest on Electric Vehicle Loan

Under Section	80EEB
Eligibility/ Coverage	1. The loan should be sanctioned between 01st April 2019 to 31st March 2023. 2. The benefit is available for 3 Wheelers, 4 Wheelers and 2 wheelers powered by electric. 3. 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.
Amount of deduction	Actual amount of interest paid during financial year or Rs.1,50,000/- which ever is less.
What proof to submit	1. Vehicle Loan Certificate issued by the financial institution certifying payment of EMI with principal and Interest paid during the financial year. 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. Disbursement letter is mandatory to check if loan is disbursed between 01st April 2019 to 31st March 2023.
Tax Regime	Benefit for Old Tax regime, for New Tax regime it will not be considered