Tax Savings Calculator
Use our Tax Savings Calculator to estimate your potential tax savings based on eligible investments and deductions. Learn how tax saving works, its benefits, and more below.
Calculate Your Tax Savings
What is Tax Saving?
Tax saving refers to the various strategies and investments that allow individuals to reduce their taxable income and thus their tax liability. By investing in certain instruments and claiming eligible deductions under the Income Tax Act, taxpayers can lower their tax burden while simultaneously building wealth. Common tax-saving instruments include investments under Section 80C, medical insurance premiums under Section 80D, and home loan interest under Section 24(b).
How Does the Tax Savings Calculator Work?
The Tax Savings Calculator helps you estimate your potential tax savings based on your income and eligible deductions by considering the following parameters:
- Annual Income: Your total income for the financial year.
- Investments under Section 80C: Eligible investments such as PPF, EPF, NSC, life insurance premiums, ELSS, etc., which can be claimed as deductions under Section 80C (up to ₹1.5 lakh).
- Medical Insurance Premium under Section 80D: Premiums paid for health insurance policies for yourself, your family, and your parents (up to ₹25,000 for self and family, and ₹50,000 for senior citizen parents).
- Home Loan Interest under Section 24(b): Interest paid on home loans, which can be claimed as a deduction under Section 24(b) (up to ₹2 lakh).
The calculator applies these deductions to your annual income to estimate your taxable income and then calculates your tax savings based on the applicable tax rate.
Benefits of Tax Saving
- Reduced Tax Liability: By investing in eligible instruments and claiming deductions, you can significantly reduce your taxable income and, consequently, your tax liability.
- Wealth Accumulation: Many tax-saving investments, such as PPF and ELSS, not only reduce your tax burden but also help you build a corpus for future needs.
- Financial Security: Investments in life insurance, medical insurance, and pension funds provide financial security for you and your family while offering tax benefits.
- Encouragement of Savings: Tax-saving incentives encourage individuals to save and invest regularly, promoting long-term financial planning and stability.
- Government Schemes: Many tax-saving instruments are part of government schemes designed to promote financial inclusion and social welfare, such as NPS, Sukanya Samriddhi Yojana, and Senior Citizen Savings Scheme.
Frequently Asked Questions (FAQ)
1. What is the maximum deduction I can claim under Section 80C?
The maximum deduction you can claim under Section 80C is ₹1.5 lakh per financial year. This includes investments in PPF, EPF, NSC, life insurance premiums, ELSS, and more.
2. Can I claim deductions for both my and my parents' medical insurance premiums?
Yes, you can claim a deduction of up to ₹25,000 for the medical insurance premium paid for yourself, your spouse, and your children. Additionally, you can claim a deduction of up to ₹50,000 for the premium paid for your senior citizen parents under Section 80D.
3. How does the home loan interest deduction work under Section 24(b)?
Under Section 24(b), you can claim a deduction of up to ₹2 lakh on the interest paid on your home loan for a self-occupied property. If the property is let out, there is no upper limit on the interest deduction, but the overall loss from house property that can be set off against other income is capped at ₹2 lakh per year.
4. Can I carry forward unused deductions to the next financial year?
No, deductions under sections like 80C, 80D, and 24(b) cannot be carried forward to the next financial year. You must claim them in the same financial year in which the investment or expense is made.
5. Are tax-saving investments risk-free?
Not all tax-saving investments are risk-free. While options like PPF and NSC offer guaranteed returns, others like ELSS (Equity Linked Savings Scheme) involve market risk. It's important to assess your risk tolerance before investing.