Income Tax Relief in India: Everything You Need to Know

Income tax relief in India offers numerous opportunities for taxpayers to reduce their tax burden legally. These relief measures help individuals keep more of their hard-earned money while encouraging investments in key economic sectors. Understanding income tax relief options is essential for effective financial planning and maximising savings.

The Indian tax system provides various forms of income tax relief through deductions, exemptions, and rebates under different sections of the Income Tax Act. These provisions are designed to promote savings, investments, and specific expenditures that align with national economic priorities.

For many Indians, housing is both a necessity and one of the largest investments they make. The government recognises this by offering substantial income tax relief on home loans, making property ownership more affordable. Whether purchasing your first home or investing in property, understanding these tax benefits can significantly reduce your overall tax liability.

This article will explore the various income tax relief measures available to Indian taxpayers, eligibility criteria, and how to maximise these benefits in your financial planning strategy.

What is income tax relief and who can benefit?

Income tax relief refers to various provisions in the Indian tax code that allow taxpayers to reduce their tax liability legally. These relief measures come in different forms, including deductions, exemptions, rebates, and special allowances designed to lower the overall tax burden.

The primary purpose of income tax relief is to encourage certain behaviours and investments that benefit both individuals and the economy. For example, income tax relief on home loans promotes homeownership, while relief on education loans supports skill development.

Almost every Indian taxpayer can benefit from some form of income tax relief. Salaried employees, business owners, professionals, senior citizens, and first-time taxpayers all have specific relief provisions tailored to their circumstances. The benefits available depend on factors such as:

• Income level and tax bracket
• Age and residential status
• Investment choices and financial commitments
• Housing and property investments

Understanding the various income tax relief options helps taxpayers make informed decisions about investments, expenditures, and financial planning. For instance, knowing about income tax relief on home loans might encourage you to invest in property rather than renting, especially with attractive options like Bajaj Housing Finance offering competitive interest rates starting from 8.25% per annum.

Overview of tax deductions and exemptions under Indian laws

Old tax regime

Deduction/ Exemption	Description
Section 80C	Up to Rs. 1.5 lakh for investments in PPF, ELSS, LIC premiums, etc.
Section 80D	Deductions for health insurance premiums.
Section 24(b)	Up to Rs. 2 lakh deduction on interest for self-occupied properties.
HRA & LTA	Exemptions for House Rent Allowance and Leave Travel Allowance.
Senior citizens	Higher basic exemption limit of Rs. 3 lakh for those aged 60-80 years and Rs. 5 lakh for super-senior citizens (above 80 years).
Donations	Deductions under Section 80G for donations to charitable organisations.
Home loan borrowers	Deduction on interest paid for self-occupied properties up to Rs. 2 lakh.
First-time home buyers	Additional deduction of Rs. 1.5 lakh on interest paid under Section 80EEA for affordable housing.

New tax regime

Deduction/ Exemption	Description
Standard Deduction	Rs. 75,000 for salaried individuals.
Section 24(b)	Deduction for interest on let-out properties.
Section 80CCD(2)	Employer’s contribution to NPS.
Section 80CCH	Deduction for contributions to Agniveer Corpus Fund.
Family pension income	Lower of 1/3rd of actual pension or Rs. 25,000.
Senior citizens	No specific additional deductions; standard benefits apply.
Donations	No specific deductions available under this regime.
Home loan borrowers	Deduction on interest for let-out properties.
First-time home buyers	No specific additional deductions under this regime.

Key points

• The old regime offers more deduction and exemption, making it beneficial for those with significant investments in tax-saving instruments.
• The new regime is simplified with fewer deductions but lower tax rates, making it suitable for those with minimal investments.
• Senior citizens benefit from higher basic exemption limits under the old regime.
• The old regime offers deductions for donations to charitable organisations.
• While both regimes offer deductions for home loan borrowers first-time home buyers can avail of additional benefits under the old regime.

Section 80C: Tax-saving investments and limits explained

Section 80C is one of the most popular income tax relief provisions available to Indian taxpayers. This section allows for a maximum deduction of Rs. 1,50,000 from your total taxable income. Here are the key qualifying investments and expenses under Section 80C:

• Life insurance premiums: Annual premiums paid for policies on yourself, spouse, or children qualify for income tax relief.
• Public Provident Fund (PPF): Contributions to PPF accounts provide income tax relief with a lock-in period of 15 years.
• Equity Linked Savings Scheme (ELSS): These mutual funds offer income tax relief with the shortest lock-in period of just 3 years.
• National Savings Certificate (NSC): These government-backed certificates provide income tax relief with interest rates that are revised quarterly.
• Tax Saving Fixed Deposits: Bank deposits with a 5-year lock-in period qualify for income tax relief under this section.
• Home loan principal repayment: The principal portion of your home loan EMIs qualifies for income tax relief up to the overall 80C limit.
• Tuition fees: Education fees paid for up to two children can provide income tax relief under this section.
• Sukanya Samriddhi Yojana: Deposits in this scheme for girl children offer income tax relief with attractive interest rates.

For maximum benefit, diversify your investments across these options based on your financial goals, risk appetite, and liquidity needs. Remember that the total income tax relief under Section 80C cannot exceed Rs. 1,50,000 per financial year.

Tax relief on home loans: Interest and principal deductions

Home loans offer some of the most substantial income tax relief benefits available to Indian taxpayers. These benefits are divided between principal repayment and interest payment deductions, making homeownership financially advantageous from a tax perspective.

Under Section 24(b) of the Income Tax Act, you can claim income tax relief of up to Rs. 2,00,000 per year on the interest paid on home loans for self-occupied property. For let-out properties, there is no upper limit on the interest deduction. This income tax relief significantly reduces the effective cost of borrowing.

The principal repayment component of your home loan EMI qualifies for income tax relief under Section 80C, up to a maximum of Rs. 1,50,000 along with other eligible investments. This dual benefit makes home loans particularly attractive from a tax planning perspective.

First-time home buyers can claim additional income tax relief of up to Rs. 50,000 under Section 80EE if they meet specific criteria, including a loan amount not exceeding Rs. 35 lakh and property value not exceeding Rs. 50 lakh.

Bajaj Housing Finance offers attractive home loan options with interest rates starting from 8.25% per annum and loan amounts up to Rs. 15 crore with flexible tenure up to 32 years. These favourable terms, combined with the substantial income tax relief benefits, make their home loans an excellent choice for property investment.

Special tax relief provisions for senior citizens

Income tax relief type	Regular taxpayers	Senior citizens (60-80 years)	Super senior citizens (above 80)
Basic exemption limit	Rs. 2.5 lakh (old regime), Rs. 3 lakh (new regime)	Rs. 3 lakh (old regime), Rs. 4 lakh (new regime)	Rs. 5 lakh (old regime), Rs. 4 lakh (new regime)
Section 80C deductions	Up to Rs. 1.5 lakh for investments like PPF, ELSS	Same as regular taxpayers	Same as regular taxpayers
Medical insurance premium deduction (80D)	Rs. 25,000 for self and family, Rs. 50,000 for parents	Rs. 50,000 for self and family, Rs. 50,000 for parents	Rs. 50,000 for self and family, Rs. 50,000 for parents
Medical treatment deduction (80DDB)	Up to Rs. 40,000 for medical treatment	Up to Rs. 1 lakh for medical treatment	Up to Rs. 1 lakh for medical treatment
Interest income exemption (80TTB)	Not applicable	Up to Rs. 50,000 on interest income	Up to Rs. 50,000 on interest income
TDS threshold on interest	Rs. 40,000 (FY 2023-24), Rs. 1 lakh (FY 2025-26)	Rs. 50,000 (FY 2023-24), Rs. 1 lakh (FY 2025-26)	Rs. 50,000 (FY 2023-24), Rs. 1 lakh (FY 2025-26)
Advance tax requirement	Applicable if tax liability exceeds Rs. 10,000	Exempted if only interest income and no other income	Exempted if only interest income and no other income

Senior citizens receive special income tax relief provisions in recognition of their unique financial circumstances and healthcare needs. The higher exemption limits provide significant income tax relief for those in their retirement years. Additionally, higher deduction limits for medical expenses acknowledge the increased healthcare costs faced by elderly taxpayers.

The income tax relief on interest income under Section 80TTB is particularly beneficial for seniors who rely on fixed deposits and other interest-bearing investments for regular income. This specific income tax relief provision helps protect their retirement savings.

Section 87A rebate: How to reduce your tax burden

Section 87A offers a valuable income tax relief in the form of a tax rebate for individuals with moderate income levels. This rebate is applied after calculating your tax liability but before adding any cess or surcharge. Here are the key points about this income tax relief provision:

• Eligibility: The rebate is available to resident individuals with a total income not exceeding Rs. 12,00,000 after all deductions.
• Rebate amount: The maximum income tax relief under Section 87A is Rs. 25,000 or the actual tax payable, whichever is lower.
• Direct tax reduction: Unlike deductions that reduce taxable income, this income tax relief directly reduces your tax liability.
• New tax regime benefit: The income tax relief under Section 87A is available under both the old and new tax regimes.
• Not available for non-residents: This income tax relief is exclusively for resident individuals.
• Applies after tax calculation: The rebate is applied after calculating tax on your total income but before adding health and education cess.
• No additional documentation: You do not need to submit any special documents to claim this income tax relief.
• Automatically calculated: Tax preparation software and the Income Tax Department automatically calculate this income tax relief for eligible taxpayers.

With the recent budget changes, this income tax relief now benefits a larger number of taxpayers with the increased threshold of Rs. 12,00,000, providing significant tax savings for middle-income individuals.

Impact of budget announcements on income tax relief

The recent budget announcements have brought significant changes to income tax relief provisions in India, reshaping the tax landscape for millions of taxpayers. The most notable change is the increase in the tax rebate threshold under Section 87A, which now exempts individuals earning up to Rs. 12 lakh annually from paying taxes under the new tax regime.

For salaried employees, this income tax relief extends further with the standard deduction, effectively raising the no-tax threshold to Rs. 12.75 lakh. This represents one of the most substantial income tax relief measures in recent years, benefiting a large segment of middle-income taxpayers.

The budget has also introduced marginal relief provisions to ensure that taxpayers whose income slightly exceeds Rs. 12 lakh do not face a disproportionate tax burden. This progressive income tax relief measure prevents a situation where a small increase in income results in a significantly higher tax liability.

The new tax regime has been made more attractive with enhanced income tax relief provisions, encouraging more taxpayers to shift from the old regime. Standard deduction, family pension deduction, and certain other benefits previously exclusive to the old regime are now available under the new regime as well.

The government has maintained the income tax relief on home loans, recognising the importance of housing to the economy and individual financial security. Homeowners can continue to claim deductions on both principal and interest payments, with additional benefits for first-time homebuyers.

Maximising your tax savings with home loans

Income tax relief provisions in India offer numerous opportunities to reduce your tax burden while promoting financial security. Among these, home loan-related deductions stand out as particularly beneficial for long-term financial planning.

With housing loans from Bajaj Housing Finance, you can enjoy dual benefits: comfortable homeownership and substantial income tax relief. Their competitive interest rates starting from just 7.99%*  p.a. make EMIs affordable at just Rs. 722/lakh*, while the tax benefits further reduce the effective cost of borrowing.

Here are key ways to maximise your tax savings with home loans:

• Claim up to Rs. 2,00,000 as interest deduction under Section 24(b)
• Include principal repayment under Section 80C for additional income tax relief
• First-time homebuyers can claim extra deductions under Section 80EE
• Use the home loan top-up facility for additional funds up to Rs. 1 crore for other needs
• Benefit from no foreclosure charges on floating interest rate loans

Bajaj Housing Finance offers several advantages that complement these income tax relief benefits:

• Flexible loan amounts of up to Rs. 15 crore* based on eligibility.
• Flexible loan tenure of up to 32 years.
• Quick disbursal within 48 Hours*.
• No foreclosure fee for floating interest rate loans
• Balance transfer facility with attractive top-up loan options.
• Hassle-free documentation process

To optimize your tax situation:

• Time your asset sales to minimise the income tax relief impact
• Consider the tax benefits of home loans in your overall financial plan
• Use available exemptions and deductions strategically
• Keep proper documentation for all transactions

Ready to enjoy substantial income tax relief while investing in your dream home? Consider a Bajaj Housing Finance Home Loan for competitive interest rates, flexible terms, and excellent service. Visit their website or contact their representative today to start your application process and take a step toward both homeownership and tax optimisation.