How to Save Income Tax for Salaried and Professionals for FY 2018-19?

We are releasing the eBook on Tax Planning which tells you how to save income tax for FY 2018-19 (AY 2019-20) for both Salaried and Professionals. This is a short 43 slide power point presentation (in pdf) which covers all the tax saving sections and investments applicable for tax payers.

But before that lets look at the changes that happened in Income Tax laws in Budget 2018.

Download Tax Planning eBook for FY 2018-19 (AY 2019-20) 1.55 MB

Budget 2018: Changes in Income Tax Rules

1. Standard Deduction of Rs 40,000 for Salaried and Pensioners

2. Transport Allowance & Medical Reimbursement No more tax exempt for salaried

3. Cess hiked from 3% to 4% (renamed as Health & Education cess)

4. Rs 50,000 interest income for senior citizens tax exempted under newly introduced Section 80TTB

5. Health Insurance Premium Tax exemption limit increased to Rs 50,000 u/s 80D for senior citizens

6. Increased deduction for medical treatment u/s 80DDB for senior citizens up to Rs 1 lakh

7. 10% tax on long term capital gains (above Rs 1 Lakh) on stocks & equity based mutual funds. Also 10% dividend distribution tax imposed on dividend paid by equity mutual funds.

For Details of changes read: 13 changes in Income Tax laws from April 1, 2018

Mentioning Some Points I am frequently asked

1. There is NO tax benefit on Infrastructure Bonds

2. There is NO separate tax slab for Men & Women

Budget 2018 - Income Tax Slabs for FY 2018-19

Budget 2018 – Income Tax Slabs for FY 2018-19 (AY 2019-20)

You can download the tax planning eBook for FY 2018-19 by clicking the link below. As stated it covers all the income tax sections available for salaried and Professional tax payers:

Download Tax Planning eBook for FY 2018-19 (AY 2019-20) 1.55 MB

I think on some platforms the above button is not clear, in that case CLICK Here to Download the Tax Planning ebook

We give a brief of all the tax saving sections below:

1. Section 80C/80CCC/80CCD

These 3 are the most popular sections for tax saving and have lot of options to save tax. The maximum exemption combining all the above sections is Rs 1.5 lakhs. 80CCC deals with the pension products while 80CCD includes Central Government Employee Pension Scheme.

You can choose from the following for tax saving investments:

  1. Employee/ Voluntary Provident Fund (EPF/VPF)
  2. PPF (Public Provident fund)
  3. Sukanya Samriddhi Account
  4. National Saving Certificate (NSC)
  5. Senior Citizen’s Saving Scheme (SCSS)
  6. 5 years Tax Saving Fixed Deposit in banks/post offices
  7. Life Insurance Premium
  8. Pension Plans from Life Insurance or Mutual Funds
  9. NPS
  10. Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Funds)
  11. Central Government Employee Pension Scheme
  12. Principal Payment on Home Loan
  13. Stamp Duty and registration of the House
  14. Tuition Fee for 2 children

We have done a comprehensive analysis of all the above available options and you can choose which is the best for you.

Know More: Which is the Best Tax Saving Investments for you u/s 80C?

Tax Saving Investment Option under Section 80C/80CCC/80CCD

Tax Saving Investment Option under Section 80C/80CCC/80CCD

2. Section 80CCD(1B) – Investment in NPS

Budget 2015 has allowed additional exemption of Rs 50,000 for investment in NPS. This is continued this year too. We have done a complete analysis which you can read by clicking the link below.

Invest or Not: Should you Invest Rs 50,000 in NPS to Save Tax u/s 80CCD (1B)?

3. Payment of interest on Home Loan (Section 24)

The interest paid up to Rs 2 lakhs on home loan for self-occupied or rented home is exempted u/s 24. Earlier there was NO limit on interest deduction on rented property. Budget 2017 has changed this and now the tax exemption limit for interest paid on home loan is Rs 2 lakhs, irrespective of it being self-occupied or rented. However for rented homes any loss in excess of Rs 2 lakhs can be carried forward for up to 7 years.

Also Read: Should you Invest in Capital Gain Bonds to Save Taxes?

4. Payment of Interest on Education Loan (Section 80E)

The entire interest paid (without any upper limit) on education loan in a financial year is eligible for deduction u/s 80E. However there is no deduction on principal paid for the Education Loan.

The loan should be for education of self, spouse or children only and should be taken for pursuing full time courses only. The loan has to be taken necessarily from approved charitable trust or a financial institution only.

The deduction is applicable for the year you start paying your interest and seven more years immediately after the initial year. So in all you can claim education loan deduction for maximum eight years.

More details @ Tax benefit on Education Loan

5. Medical insurance for Self and Parents (Section 80D)

Premium paid for Mediclaim/ Health Insurance for Self, Spouse, Children and Parents qualify for deduction u/s 80D. You can claim maximum deduction of Rs 25,000 in case you are below 60 years of age and Rs 50,000 above 60 years of age.

An additional deduction of Rs 25,000 can be claimed for buying health insurance for your parents (Rs 50,000 in case of either parents being senior citizens). This deduction can be claimed irrespective of parents being dependent on you or not. However this benefit is not available for buying health insurance for in-laws.

HUFs can also claim this deduction for premium paid for insuring the health of any member of the HUF.

To avail deduction the premium should be paid in any mode other than cash. Budget 2013 had introduced deduction of Rs 5,000 (with in the Rs 25,000/30,000 limit) is also allowed for preventive health checkup for Self, Spouse, dependent Children and Parents. Its continued to this year too.

More Details @ Tax Benefit on Health Insurance u/s 80D

6. Treatment of Serious disease (Section 80DDB)

Cost incurred for treatment of certain disease for self and dependents gets deduction for Income tax. For senior citizens the deduction amount is up to Rs 1,00,000;  while for all others its Rs 40,000. Dependent can be parents, spouse, children or siblings. They should be wholly dependent on you.

To claim the tax exemption you need a certificate from specialist from Government Hospital as proof for the ailment and the treatment. In case the expenses have been reimbursed by the insurance companies or your employer, this deduction cannot be claimed.In case of partial reimbursement, the balance amount can be claimed as deduction

Diseases Covered:

Neurological Diseases

Also Read: 5 Good News for Senior Citizens in Budget 2018

8. Physically Disabled Tax payer (Section 80U)

Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or diseases. The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs 1.25 Lakh for severe disability (80% or more disability)

A certificate from neurologist or Civil Surgeon or Chief Medical Officer of Government Hospital would be required as proof for the ailment.

Disabilities Covered

  1. Blindness and Vision problems
  2. Leprosy-cured
  3. Hearing impairment
  4. Locomotor disability
  5. Mental retardation or illness
  6. Autism
  7. Cerebral Palsy

Also Read: How to Calculate Income Tax? – explained with example

9. Physically Disabled Dependent (Section 80DD)

In case you have dependent who is differently abled, you can claim deduction for expenses on his maintenance and medical treatment up to Rs 75,000 or actual expenditure incurred, whichever is lesser. The limit is Rs 1.25 Lakh for severe disability conditions i.e. 80% or more of the disabilities. Dependent can be parents, spouse, children or siblings. Also the dependent should not have claimed any deduction for self disability u/s 80DDB.

To claim the tax benefit you would need disability certificate issued by state or central government medical board.

You can also claim tax exemption on premiums paid for life insurance policy (in tax payers’ name) where the disabled person is the beneficiary. In case the disabled dependent expires before the tax payer, the policy amount is returned back and treated as income for the year and is fully taxable.

40% or more of following Disability is considered for purpose of tax exemption

  1. Blindness and Vision problems
  2. Leprosy-cured
  3. Hearing impairment
  4. Locomotor disability
  5. Mental retardation or illness

Also Read:How to Pay 0 Income Tax on Rs 16 Lakh Salary?

How to Save Income Tax for FY 2018-19

How to Save Income Tax for FY 2018-19

10. Donations to Charitable Institutions (Section 80G)

The government encourages us to donate to Charitable Organizations by providing tax deduction for the same u/s 80G. Some donations are exempted for 100% of the amount donated while for others its 50% of the donated amount. Also for most donations, the maximum exemption you can claim is limited to 10% of your gross annual income. Please note that only donations made in cash or cheque are eligible for deduction. Donations in kind like giving clothes, food, etc is not covered for tax exemption.

How to Claim Sec 80G Deduction?

  1. A signed & stamped receipt issued by the Charitable Institution for your donation is must
  2. The receipt should have the registration number issued by Income Tax Dept printed on it
  3. Your name on the receipt should match with that on PAN Number
  4. Also the amount donated should be mentioned both in number and words

Also Read: 25 Tax Free Incomes & Investments in India

11. Donations for Scientific Research (Section 80GGA)

100% tax deduction is allowed for donation to the following for scientific research u/s 80GGC

  1. To a scientific research association or University, college or other institution for undertaking of scientific research
  2. To a University, college or other institution to be used for research in social science or statistical research
  3. To an association or institution, undertaking of any programme of rural development
  4. To a public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme
  5. To the National Urban Poverty Eradication Fund set up

Also Read: How you Loose Money in FD?

12. Donations to Political Parties (Section 80GGC)

100% tax deduction is allowed for donation to a political party registered under section 29A of the Representation of the People Act, 1951 u/s 80GGC. The maximum exemption you can claim is limited to 10% of your gross annual income

Download Tax Planning eBook for FY 2018-19 (AY 2019-20) 1.55 MB

13. House Rent in case HRA is not part of Salary (Section 80GG)

In case, you do not receive HRA (House Rent Allowance) as a salary component, you can still claim house rent deduction u/s 80GG. Tax Payer may be either salaried/pensioner or self-employed.

To avail this you need to satisfy the following conditions:

  1. The rent paid should be more than10% of the income
  2. No one in the family including spouse, minor children or self should own a house in the city you are living. If you own a house in different city, you have to consider rental income on the same

The House Rent deduction is lower of the 3 numbers:

  1. Rs. 5,000 per month [changed from Rs 2,000 to Rs 5,000 in Budget 2016]
  2. 25% of annual income
  3. (Rent Paid – 10% of Annual Income)

You need to fill form no 10BA along with the tax return form

More details @ Claim Tax Benefit for Rent Paid u/s 80GG

Along with the tax saving sections and investments for both salaried and business, it also has details about all the common salary components and their tax treatment. This section can help you to plan your salary components in case your company offers such facility.

We hope that this eBook (in pdf/ppt format) would help you in understanding, planning and saving taxes.

Please give us your feedback and help us improve!

72 thoughts on “How to Save Income Tax for Salaried and Professionals for FY 2018-19?

  1. Umesh Kumar says:

    Dear Sir,

    Please clarify how to provide standard exemption of Rs 40000/- for employee who joined in mid of the Financial year.


    • The standard deduction is annual deduction so even if employee joins in mid-year he is eligible for Rs 40,000 standard deduction.

  2. Hi Amit,

    I have 2 queries :

    1) What is advisable paying same amount as Tax or avail benefit of “Loss against Property” but ultimately you pay to the Bank i.e. your outgo remains the same.

    2) How to save maximum tax if annual CTC is more then 30 L ?


  3. What is the best options for tax saving for 30% bracket people.

  4. Thanks Amit for this very informative post. One doesn’t have to look elsewhere now for any tax related query!

    Is 40000 standard deduction also available for a person receiving “Family Pension”?

    • No the standard deduction of Rs 40,000 is only when you have employer pension and not applicable for family pension.

  5. please forward me my salary structure as per FAct 2018-19 .my CTC is 4,20,000

  6. Wadatiya K T says:

    Best explanation about tax savings

  7. Hi Amit
    You have explained about tax saving very clearly
    I enjoyed reading your blog full of information

  8. Hi, I am working in IT with 30% tax bracket. Also, doing software consultation in India and US. Getting paid from the US in Dollars and India in Rupees. Q1. How should I pay my taxes?

    For my consultation work one of my client deducting the tax at 10%.
    Q2. Can I have two tax deductions from two companies?
    Thank you for the help.

    • You have income from both salary and business, so you’ll have to choose from ITR 3 or ITR 4 form. As your consultancy can be classified as “Technical consultancy” it may qualify for presumptive taxation (provided the income is less than Rs 50 lakhs). In case of presumptive taxation, you’ll need to pay tax on 50% of income from consultancy and your salary. The TDS deducted would be counted as tax paid and would be adjusted in the final tax payable or returnable.

      In case you do not qualify for presumptive taxation, you’ll have to calculate your profits from business (revenue – all expenses) and add it to your salary income and pay tax accordingly.

  9. kiran Koneru says:

    Dear Amit,

    The best explanation about tax savings .

    Can you please explain about interest on house loan(self and rented ) and complete PF contribution and calculation.
    It would be great help to me and your followers .

  10. Amit, you have given quite good information for taxpayers.

    I want to add on that,
    Under section 80D, a standard deduction of Rs.40,000 pertaining to the existing transport allowance and miscellaneous medical costs has been proposed. Regardless of that, transport allowances for differently – able persons will continue to exist at the same rate.

    For more information related to saving income tax, visit this channel

  11. Amit, Your information is quite valuable for taxpayers.

    I want to add on that,
    Under section 80D, a standard deduction of Rs.40,000 pertaining to the existing transport allowance and miscellaneous medical costs has been proposed. Regardless of that, transport allowances for differently – able persons will continue to exist at the same rate.

    For more information related to saving income tax, visit this channel URL

  12. Nitin Associates says:

    Nitassociates- tax professionals draw on their diverse perspectives and skills to give you a seamless service through all the challenges of planning, financial accounting, tax compliance and maintaining effective relationships with the tax authorities. Tax Advisory Dombivli

  13. Pramod Tambat says:

    Is surender amount of a pension policy before maturity is taxable. Is there any remedy to save tax in this condition?

  14. दीपेश says:

    अमित जी,
    पूरी जानकारी एक ही जगह देने के लिए शुक्रिया|
    एक बात जाननी थी हेल्थ इंश्योरेंस में multi-year पालिसी के लिए|
    अगर 2 वर्ष की पालिसी मैं मई 2018 में लेता हूँ और 50,000 रुपये का प्रीमियम देता हूँ, तो FY2019, FY2020 और FY2021 में कितना टैक्स बेनिफिट ले पायूंगा?

  15. RISHABH KUMAR says:

    Dear Amit,
    I have lost around 3 lakh in the year 2017-2018 in share market. Somewhere i have read we can show the losses made in equity market maximum in the 2 years. I am thinking to show just 1lakh in the year 2017-2018 and 2 lakh in 2018-2019, to save tax because of my slab.
    Please suggest whether i can do that or if any other suggestions?

  16. Piyush Patel says:

    I have taken loan in co-applicant(husband & wife).
    In income tax savings of principal and interest, how much percentage of share we can apply??
    Or can we claim as per our salary slab as per our requirement????

    • If there is NO % of ownership you can assume it to be 50% each and claim 50% of both interest & principal accordingly. In case you want to change the % holding you can (depending on proportion of EMI each one of you pay) but keep it constant year over year.

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