How To Save Tax Without Investment?

One can reduce tax liability and increase tax savings by planning their finance properly. It is not always necessary to make investments to save taxes. You can save tax without investing in a single scheme and just going ahead with your regular expenses. 

If you are a salaried employee, you can avail of certain deductions and exemptions during a financial year and lower your tax liability considerably. You can take advantage of these while filing your income tax return for FY 2024-25 (AY 2025-26).

Understanding New vs Old Tax Regime

A new tax regime was introduced in Budget 2020 wherein the tax slabs were altered, and taxpayers were offered concessional tax rates. However, those who opt for the new regime cannot claim several exemptions and deductions, such as HRA, LTA, 80C, 80D , and more.

The old regime is the tax system that prevailed before the introduction of the new regime. Under this regime, there are over 70 exemptions and deductions available, including HRA and LTA, that can reduce your taxable income and lower tax payments. The most popular and generous deduction is Section 80C, which allows for a reduction of taxable income up to Rs 1.5 lakh.

The taxpayers are given a choice between the old and the new tax regime. Click here to know more

Ways On How To Save Tax Without Investing

The Income Tax Act allows various deductions and exemptions if taxpayers have not made any investments. These will help in reducing your tax load to a huge extent. Let us look at some of them: 

Standard Deduction

Every salaried individual can claim a standard deduction of up to Rs.50,000 under the old regime and Rs. 75,000 under the new regime while filing an income tax return. It would help if you considered this while calculating your total tax liability. 

House Rent Allowance

If you live in a rented house, you can claim HRA or House Rent Allowance exemption under the Income Tax Act. This is a great way to save some of your tax. According to section 10, the HRA allowance is either fully or partially exempt, depending on certain conditions. Taxpayers can get this benefit under the old tax regime only.

You can calculate your HRA exemption by finding which is the lowest among the three amounts:

• Actual amount of HRA you receive.
• Rent if it is less than 10% of your salary.
• 40% of the salary in case you reside in a non-metropolitan city and 50% in case of a metropolitan city.

You can also claim HRA exemption if you live with your parents and not in a rented accommodation. Read our article to know more!

Children’s Tuition Fee And Hostel Allowance

According to section 80C, you can claim a deduction of the tuition fee you pay for your children (maximum two) to any educational institute; however, the limit is Rs1,50,000. Other than that, according to section 10(14), you are exempt from paying taxes for special allowances given by employers for the education of your children, which might include hostel expenditures. Taxpayers can get this benefit under the old tax regime only.

Further, if you are receiving a Children's Education Allowance as part of your salary, you can claim an exemption of Rs. 100 per month for up to two children under the old tax regime. 

Housing Loan

You can claim a deduction under section 24(b) of up to Rs.2,00,000 for interest on the loan for the purchase/construction of a self-occupied property under the old tax regime only. However, for a let-out property, the entire interest payment can be claimed as a deduction without any upper limit under both tax regimes. You can also claim a deduction for repayment of the principal component under section 80C. However, suppose your property is only partially constructed within five years of taking the loan, or you avail a loan for repair or reconstruction. In that case, you will be eligible for a deduction of Rs.30,000.

Another way to reduce your taxable income is by utilising the set-off and carry-forward provision for losses. However, this is allowed only under the old tax regime. 

Education Loan

Another trick to save tax without investment is claiming a deduction of interest paid on education loans under section 80E. You can claim the entire interest part because there is no upper limit. This loan should be taken for higher education purposes for self, spouse, or children, and the period for claiming a deduction is eight years. Taxpayers can get this benefit under the old tax regime only.

Deduction On Interest

You can even park your excess funds in the bank, take advantage of section 80TTA and save up to Rs.10,000 of your taxable income. However, if you are above 60, you can claim a deduction of up to Rs.50,000 on any type of deposit, including a fixed deposit, as per section 80TTB. Taxpayers can get these benefits under the old tax regime only.

Leave Travel Concession

Employees who receive leave travel concession or LTA can claim a deduction under section 10(5) for expenditures incurred for themselves, siblings, spouses, parents or children. However, this applies to travel within India and two journeys within four calendar years. Taxpayers can get this benefit under the old tax regime only.

Employees Provident Fund

One of the deductions you need to consider without fail is your contribution towards the Employees Provident Fund. According to section 80C, you can claim a deduction of up to Rs.1,50,000 for your contributions towards a recognised provident fund. Taxpayers can get this benefit under the old tax regime only.

Mediclaim Premium

If you pay a Mediclaim premium or contribute to the Central Government Health Scheme for yourself, your spouse, children or parents, you can claim up to Rs.25,000 tax deduction. If your parents are above 60 years old, you are eligible for a deduction of Rs.75,000 as per section 80D for premiums paid for yourself and your parents. However, if you and your parents are below 60, you can deduct Rs.50,000 on insurance premiums. Taxpayers can get this benefit under the old tax regime only.

Life Insurance Premium

Another effective way to save tax and secure your family is to opt for a life insurance policy. If you contribute to any life insurance policy for yourself, your spouse and your children under section 80C, you can claim a deduction of up to Rs.1,50,000. Taxpayers can get this benefit under the old tax regime only.

Donations Are Tax-free

“Help in need is help indeed”- if you intend to contribute to needy people such as flood victims, the PM Cares fund will also help you save taxes under section 80G. Also, donations to charitable institutions are eligible for deductions upto 50% of the donations made. Taxpayers can get this benefit under the old tax regime only.

Set Off Your Losses Against Incomes / Profits / Gains

Profit and losses are two sides of a coin. Losses, of course, are hard to digest. However, the Income-tax law in India does provide taxpayers some benefits of incurring losses too. The law contains provisions for set-off and carry forward of losses.

Set off of losses means adjusting the losses against the profit or income of that particular year. Losses that are not set off against income in the same year can be carried forward to the subsequent years for set off against income of those years. A set-off could be an intra-head set-off or an inter-head set-off. As your incomes get set off, your tax liability would reduce.

Income From Agriculture

In the new tax regime, income from agriculture is not subject to income tax deduction. However, the Income Tax Act established an indirect taxation method for such income. It is called the partial integration of agricultural and non-agricultural incomes. The Act intends to impose higher tax rates on non-agricultural income.

Final Word

Although the points mentioned above do not directly fall under the category of investments, they can still help you save tax to some extent. Tax-saving options should always be given priority as they help save taxes and secure your family financially. Additionally, using the above-stated ways will help you save current tax costs and will improve your financial health. They also encourage money management, which is very much essential for long-term financial stability and to achieve your financial goals. 

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