Income Tax Exemption Limit – Complete Guide to Slabs & Deductions

Key Insights 

1. Look up the entry for your tax regime. Compare the old and new tax regime slabs and exemption lists to see which one offers you a higher basic tax-free income for your age.

2. If you are over 60, use your higher basic exemption limit and make sure to claim special deductions like Section 80TTB for interest income.

3. Make the most of the income tax exemption limit for salaried employees by investing under Section 80C and submitting all the required receipts and certificates for your claims.

Do you know how much of your income is tax-free? Understanding the income tax exemption limit for salaried employees and the income tax exemption limit for senior citizens can help you plan and keep more of what you earn.

If you are in the income tax slab for senior citizens above 60 years, your exemption limit is higher, giving you extra relief. The old tax regime's slabs you pick determine when you start owing taxes.

Example:

I am 65 years old, so under the old tax regime slabs, my basic exemption limit is ₹3,00,000. In the new tax regime exemption list, the basic limit is higher at ₹3,75,000, but many deductions are not available. 

As a retiree, I review the income tax slab for senior citizens above 60 to determine which option helps me save more.

Eligibility Criteria for Income Tax Exemption Limit

Not all of your allowance is tax-free. Find out who can claim the exemption and what rules you need to follow to qualify.

Here is the list of the eligibility for the Income Tax Exemption Limit:

Pick the tax regime that fits your age, income, and deductions to get the most tax-free income.

Bonus Tip: Do you know? Form 10-IEA is a declaration that taxpayers use to opt out of the new tax regime.

Deduction Limits Under Income Tax Exemption Limit

It’s important to understand deduction ceilings. These are the limits on how much you can claim to lower your taxable income each year.

• Most salaried people and pensioners get a standard deduction of ₹50,000 under the Old Regime. Under the New Regime, this amount will go up to ₹75,000 from FY 2025-26.
• Section 80C lets you claim up to ₹1,50,000 for investments such as PPF, ELSS, life insurance, and NSC.
• Section 80CCD gives an extra deduction for NPS contributions. You can claim up to ₹50,000 under Section 80CCD(1B) in addition to the 80C limit.
• Section 80TTA allows people under 60 to claim up to ₹10,000 for savings account interest. Section 80TTB lets senior citizens claim up to ₹50,000, including interest from fixed deposits.
• Section 80EEB lets you claim up to ₹1,50,000 on interest paid for electric vehicle loans.

Use these caps in each section to create a strong deduction plan and lower your final tax bill.

Required Documents for Income Tax Exemption

To make a successful claim, you need solid proof. Collect the important documents that support your deductions and exemptions before you file your return.

• For Section 80C investments, collect receipts for LIC, PPF, ELSS, NSC, tuition fees, and your home loan principal payments.
• For House Rent Allowance, keep your rent receipts, rental agreement, and your landlord’s PAN if your annual rent is over ₹1,00,000.
• To claim home loan interest deductions under Section 24(b) and 80C, you’ll need your Home Loan Interest Certificate.
• For Section 80D, gather premium payment receipts for health insurance covering yourself, your family, and your parents.
• Donations: Receipts for contributions to eligible charities (for Sec 80G).
• For interest income, collect interest certificates from your banks. You may need these for Form 15G or 15H if they apply to you.

Sort your documents into sections, make sure they are easy to reach, and keep your filing simple to save space.

How to Claim Income Tax Deduction in ITR?

Make the most of your investments by saving on taxes. Follow this step-by-step guide to claim every deduction in your Income Tax Return.

Here are some simple steps for claiming Income Tax Deduction in ITR:

 

Step 1: Go to the Income Tax e-filing portal and log in using your User ID (PAN) and password.

Step 2: Pick the right ITR form (like ITR-1 or ITR-2) and click Start New Filing or Resume.

Step 3: Go to the deductions section and look for schedules such as:

• Chapter VI-A Deductions: This includes sections like 80C (PPF, ELSS, Life Insurance), 80D (Health Insurance), and 80G (Donations). Property: For HRA (Rent Paid) or Interest on Home Loan (Section 24).
• Other Specific Schedules: For deductions such as 80GG (rent paid without HRA), make sure you have already filed Form 10BA.

Step 4: Enter the amounts for your investments (like PPF or NSC), insurance premiums, rent paid, or loan interest. Make sure you have the necessary documents, such as receipts or statements.

Step 5: After you fill out a schedule, click Confirm or Proceed to save your entries.

Step 6: Preview & Validate: Click 'Proceed to Preview' and then 'Proceed to Validation' to check for errors.

Step 7: E-Verify: After validation, proceed to e-verify your return (via Aadhaar OTP, Net Banking, etc.). 

List all your eligible expenses, upload your e-verified return, and your tax savings will be processed.

Bonus Tip: If you have business income (except from cooperative societies) and file ITR-3, ITR-4, or ITR-5, you need to submit Form 10-IEA. If you use ITR-1 or ITR-2, you do not need to submit this form.

Conclusion

First, pick the tax regime that fits your needs. The old regime gives you more deductions, while the new one is simpler and has higher limits. 

Then, make the most of your investment limits and keep your documents in order for each claim. Following these steps can help you lower your tax bill and keep more of your earnings.

FAQs

Why is the new tax exemption limit of ₹12,00,000 good?  

The new ₹12,00,000 tax-free limit in India’s New Tax Regime for FY 2025-26 brings real relief to the middle class. Thanks to a higher rebate under section 87A and the standard deduction, anyone earning up to ₹12,00,000 a year will not have to pay tax. This update makes tax planning easier for people who do not claim many investments, lets them keep more of their earnings, and may encourage them to spend more.

How is there no income tax on income up to ₹7,00,000? 

If you choose the New Tax Regime, you do not have to pay any income tax on income up to ₹7,00,000. This is because of a ₹25,000 tax rebate under Section 87A for FY 2024-25. After claiming the standard deduction, this makes income up to ₹7,00,000 tax-free, especially for salaried individuals.

What is the income tax exemption limit?  

In India, the basic income tax exemption limit is usually ₹2,50,000 for most individuals. For senior citizens, it is ₹3,00,000, and for super senior citizens, it is ₹5,00,000 under the Old Tax Regime. 

What are the different ways people use to get an income tax exemption in India? 

In India, you can reduce your taxable income by using employer allowances like HRA and LTA. You can also invest in government schemes such as PPF, NPS, and Sukanya Samriddhi under Section 80C or 80CCD. 

What is the benefit of the basic exemption limit?

The basic exemption limit means you do not have to pay any tax if your income is below a certain amount. The Income Tax Department of India sets this rule.
 

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