Income tax planning for 2024: A look at strategies, sections and investment options

Salaried individuals must evaluate and select the most advantageous tax regime for them—be it the old or the new regime. Analysing tax liabilities under both systems helps in opting for the one resulting in the least tax outflow. The newer tax regime introduced offers lower tax rates, benefiting those previously ineligible under the older regime, albeit it remains optional.

There exist several sections in India's tax laws that enable income tax savings.

Section 80C: This segment permits a deduction of up to ₹1.5 lakh from taxable income for investments in specific financial instruments, including Public Provident Fund (PPF), Employee Provident Fund (EPF), Unit Linked Insurance Plans (ULIPs), National Pension System (NPS), Equity Linked Saving Schemes (ELSS), and five-year tax-saving bank fixed deposits.

Section 80D: It allows deductions of up to ₹25,000 for health insurance premiums paid for oneself, spouse, and dependent children. An additional ₹25,000 deduction is possible for parents' health insurance, capped at ₹50,000 annually.

Section 80E: This section permits a deduction for interest paid on education loans without any specific limit.

Section 80G: Contributions to select charitable organisations qualify for a deduction, capped at 50% of the donated amount or 10% of total income.

Section 80TTA: Allows deduction of interest earned on savings account deposits up to ₹10,000 from taxable income.

Section 80EE & 80EEA: Tailored for first-time home buyers, offering deductions on home loan interest up to ₹50,000 and an additional ₹1.5 lakh, respectively, with specific conditions on loan tenure and property value.

Equity Linked Saving Scheme (ELSS): ELSS gives the benefits under Section 80C and helps in growing wealth. A mandatory lock-in of three years in ELSS funds helps investors create a healthy corpus.

Donations and LTC benefits: Claiming deductions for donations and availing Leave Travel Concession (LTC) benefits supported by employers are advised for maximising savings.

Unit Linked Insurance Plan (ULIPs): ULIPs are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. The premiums paid towards a ULIP are eligible for a deduction from taxable income up to a maximum limit of ₹1.5 lakh per financial year.

Public Provident Fund (PPF): PPF is a long-term savings scheme offered by the government. It has a lock-in period of 15 years, and the interest earned is tax-free.

National Savings Certificate (NSC): NSC is a fixed-income investment scheme offered by the post office. It has a lock-in period of five years.

Life Insurance Premium: Premiums paid for life insurance policies are eligible for deduction under Section 80C.

Employee Provident Fund (EPF): Contributions made to the EPF by an employee are eligible for deduction under Section 80C.

Sukanya Samriddhi Yojana (SSY): SSY is a government-backed savings scheme designed to encourage savings for the education and marriage of a girl child.

Senior Citizens Savings Scheme (SCSS): SCSS is a savings scheme for senior citizens, offering regular income with tax benefits.

Fixed Deposit (FD): Tax-saving fixed deposits with a lock-in period of five years are also eligible for deduction under Section 80C.

Mid-50s: Risk-averse individuals in this age bracket can opt for fixed return instruments like Fixed Deposits (FDs), National Saving Certificates (NSC), and Public Provident Fund (PPF) for stability.

Late 40s: With shorter lock-in periods, FDs or NSCs are favoured compared to the 15-year lock-in period of PPF.

Balanced portfolio: A mixed portfolio strategy combining fixed benefits from PPF with market-linked ELSS (12-14% returns over the long term) ensures a balanced return.