Income Tax Saving Investments – Save your Taxes beyond 80C Deductions

As the celebrated say goes ‘ A penny saved is a penny earned ‘. Tax planning is one of the ways which can help you save on taxes and increase your income. The income tax act provides deductions for versatile investments, savings and expending incurred by the taxpayer in a particular fiscal class. We will discuss some of the avenues which can help you save taxes .

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Recommended ways of saving taxes under Sec 80C,80D and 80EE

  • Make an investment of Rs 1.5 lakh under Sec 80C to reduce your taxable income. Additional deduction of Rs 50,000 can be claimed by investing in NPS under 80CCD (1b)
  • Buy Medical Insurance, maximum deduction allowed is Rs. 1,00,000 (Rs 50,000 for self and family if senior citizen and Rs 50,000 for senior citizen parents) under Section 80D.
  • Claim deduction up to Rs 50,000 on Home Loan Interest under Section 80EE

Investment options under Sec 80C

The most democratic tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act, Section 80C includes versatile investments and expenses you can claim deductions on – improving to the terminus ad quem of Rs. 1.5 hundred thousand in a fiscal class.

Investment Returns Lock-in Period
5-Year Bank Fixed Deposit 6% to 7% 5 years
Public Provident Fund (PPF) 7% to 8% 15 years
National Savings Certificate 7% to 8% 5 years
National Pension System (NPS) 12% to 14% Till Retirement
ELSS Funds 15% to 18% 3 years
Unit Linked Insurance Plan (ULIP) Varies with Plan Chosen 5 years
Sukanya Samriddhi Yojana (SSY) 7.60% N/A
Senior Citizen Saving Scheme (SCSS) 7.40% 5 years

Other Tax Saving options beyond Sec 80C

apart from the 80C deductions, there are respective deductions under section 80 you can use to save on income tax. Tax benefits on health indemnity premiums and dwelling loan sake are a few-

  • Medical insurance premium to be claimed at Rs. 50,000. (Rs 25000 for self spouse and children and Rs 25000 for dependent parents below 60 years). Claim medical insurance premium paid up to a maximum of Rs 1,00,000 per annum if availed for senior citizens. If senior citizens are not covered under any health insurance, then medical expenditure incurred can be claimed under 80D up to Rs 50,000
  • Interest paid on a home loan can be claimed as a deduction under section 24 up to Rs 2 lakhs. Section 80EE also allows you to claim a deduction of up to Rs 50,000 on home loan interest which is over and above the limit of section 24. Eligibility of additional interest of Rs 1.5 lakh on purchase of a new house under affordable housing scheme as per section 80EEA is extended till 31st March 2022
  • A home loan would also help you in reducing your taxable income as the principal portion of the home loan can be claimed under Section 80C up to Rs 1.5 lakh and the interest portion can be claimed as a deduction from income from house property
  • Any charity to notified institutions or funds can be claimed as a deduction under section 80G
  • Interest paid on education loan is allowed as deduction under section 80E

How to plan your tax-saving investments for the year

The best clock time to start planning your tax-saving investments is at the beginning of the fiscal year.

Most taxpayers procrastinate till the last stern of the year, resulting in rush decisions. rather, if you plan at the begin of the year, your investments can compound and help you achieve long-run goals. Remember, tax-saving should be an extra perk up and not a goal in itself .
Use the comply pointers to plan your tax-saving for the class :

  • Check the tax-saving expenses you already have – like insurance premiums, children’s tuition fees, EPF contribution, home loan repayment etc.
  • Deduct this amount from Rs 1.5 lakh to figure out how much to invest. You needn’t invest the entire amount if expenses are covering the limit.
  • Choose tax-saving investments based on your goals and risk profile. ELSS funds, PPF, NPS and fixed deposits are some of the popular options.

This means, you can figure out how to exhaust the 80C limit. It is best to begin investing in the first quarter of the fiscal year then that you can spread the investments over the year. Doing this won ’ metric ton burden you at the end of the year and will besides allow you to make inform investing decisions.

Frequently Asked Questions

How does Income Tax work in India?

Given a choice, most of us wouldn ’ thyroxine want to pay tax on the income we earn. But we should. As citizens of India, we are besides consumers of the nation ’ s public infrastructure and facilities, and income tax is an important source of gross for the government. so, it is our duty and responsibility to contribute towards building and maintaining the public infrastructure. Paying income tax and charge income tax returns on time ensure that .

What do you mean by 80C deduction under chapter VI A?

Income tax department allows reducing of the taxable income of the taxpayer in case the taxpayer makes certain investments or eligible expenditures allowed under Chapter VI A. 80C allows deduction for the investment made in PPF, EPF, LIC agio, Equity-linked saving scheme, principal measure payment towards home loan, stamp duty and adjustment charges for purchase of property, Sukanya smriddhi yojana ( SSY ), National saving security ( NSC ), Senior citizen savings outline ( SCSS ), ULIP, tax saving FD for 5 years, Infrastructure bonds etc

How to save tax other than section  80C?

aside from 80C, respective other provisions allow deductions to taxpayer as follows :

  • 80D- for medical insurance premium for self, spouse &  dependent parents. 
  • Section 80EE – Deduction  for interest payment of home loan for first home owners
  • Section 24- Interest deduction for housing loan upto Rs 2 lakh
  • Section 80EEB- interest deduction for vehicle loan for purchase of electric vehicle
  • 80G- donations to charitable institutions. 
  • 80GG-if your income does not include HRA component, you can claim rent deduction under 80GG
  • Section 80TTA- deduction upto Rs 10,000 for interest received in saving bank account. 
  • Section 54 -54F – Capital gain exemption for capital gains. 
What is section 80CCD ?

80CCD is a subsection of 80C which allows a discount for contributions to national pension schemes as notified by the central government. The deduction is allowed for contributions made by an employee, employer or volunteer self contribution. The overall terminus ad quem of deduction allowed in section 80C is Rs 1.5 hundred thousand plus an extra discount of Rs 50,000 u/s 80CCD ( 1b ) for self contribution to NPS or Atal pension yojana

What is the maximum deduction under section 80D

maximum deduction allowed varies in different scenarios as below :

  1. Individuals can claim a maximum deduction of Rs 25000 for insurance premium for self, spouse and dependent children. 
  2. Individuals can claim a maximum deduction up to Rs 50, 000 including premium for self, spouse, dependent children and dependent parents below 60 years of age.
  3. Whereas, Individuals can claim a maximum deduction of up to Rs 75, 000 including premium for self, spouse, dependent children and dependent parents above 60 years of age.
  4. Further Rs 1,00,000 can be claimed as a maximum deduction if an individual is above 60 years of age and makes the payment for premium for self, spouse, dependent children and dependent parents who are also above 60 years of age. 
What is section 24?

section 24 allows a deduction for home plate lend interest up to Rs 2 hundred thousand if the house place is self-occupied or vacant whereas if the theater is rented, the entire matter to sum can be deducted from the ‘ Income from house property. This deduction gets redacted to Rs 30,000 if the follow conditions are not met ( one ) Home loanword should be taken for purchase or construction of the house property ( two ) The loanword must be taken after 1st April 1999 ( three ) In case of structure of house property, the same should be completed within 5 years.

Who can claim HRA exemption? 

salaried employees who receive family rent allowance as a share of wage and make a payment towards rent can claim HRA exemption to reduce their taxable wage wholly or partially .

How to calculate HRA ?

HRA exemption is allowed least of the below :

  • Actual HRA received by the employee
  • 40 % of salary for non-metro city or 50 % of salary if the rented property is in Metro city like Mumbai, Delhi, Kolkata, Chennai )
  •  Actual rent paid less than 10% of salary.

For the above calculation, the wage would include basic, costliness allowance and repair share of mission.
For more on tax-saving investments and expenses, read our extensive section 80C scout.

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