Making tax savings investments is a ritual that every taxpayer has to go through before the end of every financial year. There are many tax-saving schemes and options available for taxpayers in the Income Tax Act which helps them save a chunk of tax as well as make significant investments in the process.
The most common and widely used tax-saving provision available in the Act is Section 80C. There are many options that the taxpayers can invest in under section 80C and claim the benefit of a deduction up to Rs. 1,50,000 from their gross total income. Some of the options available under section 80C are an investment in PPF, LIC, tax saving mutual funds, fixed deposits, Sukanya Samriddhi Yojana, NPS, repayment of home loans, etc.
Other tax saving options
Apart from Section 80C, the Act provides many more tax-saving options for the taxpayers to reduce their tax liabilities. Some of such tax saving options that you could consider for saving taxes before investing additional money under Sec 80C are
Tax deduction under 80CCD (Investment in NPS)
Section 80CCD provides for an additional deduction of up to Rs.50,000 on investment in NPS. This deduction is over and above the limit prescribed in section 80C. This gives the taxpayers the benefit of a total deduction of up to Rs.2,00,000 through investment in NPS.
Tax deduction under 80D (Deduction on premium paid for health insurance)
Section 80D provides for deduction on account of premium paid for the health insurance of self and family members. The deduction permissible under this section is stated below,
- The taxpayer is entitled to get a deduction of Rs. 25,000 in relation to a premium paid for health insurance of self, spouse, and children.
- If the taxpayer pays for the health insurance of parents, such taxpayer is entitled to an additional deduction of Rs.25,000.
- The total limit of deduction is further increased to Rs. 75,000 if the taxpayer is below the age of 60 and the parents are above the age of 60.
- If both the taxpayer and the parents are above the age of 60 years, the total limit of deduction will be Rs. 1,00,000.
The deduction under this section includes the amount spent on preventive health checkups up to a maximum amount of Rs. 5,000 spent on self, spouse, children or parents.
Tax deduction under 80E (Deduction for interest on higher education loan)
Section 80E provides a tax deduction for payment of interest on education loans. This loan can be taken for the higher education of self, spouse, children, or being in the capacity of a legal guardian of any student. There is no upper limit for deduction under this section. This section allows the taxpayer to start claiming deduction under this section from the year they start repaying the loan till a maximum period of 7 years or till the interest is paid in full, whichever is earlier. The section further provides that the tax deduction is permissible only if the loan is taken from an approved financial institution as well as for higher studies only.
Tax deduction under 80EEA (Deduction on loan for first time home buyers)
Section 80EEA provides a tax deduction of up to Rs. 1,50,000 for first time home buyers provided they do not own any other house property. This deduction is over the tax benefit of Rs. 2,00,000 that is available for the repayment of home loan interest under section 24.
The taxpayer has to meet certain preset conditions to be eligible for deduction under this section. These conditions are,
- The stamp duty value of the house has to be lower than Rs. 45,00,000
- Home loan has to be sanctioned between 1st April 2019 to 31st March 2020.
Tax deduction under 80EEB (Deduction on loan for buying electric vehicles)
This is a recent amendment in the Income Tax Act, that has been included to promote the purchase and use of electronic vehicles. This section provides a deduction of up to Rs. 1,50,000 for any loan taken to purchase an electric vehicle. The underlying condition for the same is that the loan should have been sanctioned between 1st April 2019 to 31st March 2023.
Tax deduction under section 80G (Deduction on donations made by the taxpayer)
Section 80G provides tax deductions for any donations made by the taxpayers. Donations made to certain national funds like National Defence Fund, PM National Relief Fund, National Children Fund, etc. are eligible for a deduction of 100% of the amount donated. Certain other notified funds and trusts are also eligible for a donation of up to 50% of the amount donated or as per the other provisions or guidelines mentioned in this section. Cash donations only up to Rs. 2,000 are eligible for deductions beyond which donations are eligible only if they are made through cheques.
Tax deduction under section 80TTA (Deduction on interest from bank accounts, etc.)
This section provides for a tax deduction of up to Rs. 10,000 with respect to the interest income that is received by the taxpayer through any savings bank account, post office, or a co-operative society engaged in the business of banking.
Tax deduction under section 80TTB (Deduction on interest from bank accounts, etc. for a senior citizen)
Section 80TTB is an extension of the above-mentioned section that provides a tax deduction of up to Rs. 50,000 with respect to the interest income that is received by the taxpayer being a senior citizen. The eligible income for such deduction is the interest income received through any savings bank account, post office, or a co-operative society engaged in the business of banking.
Tax deduction under section 24 (Deduction on interest on the home loan)
Section 24 provides relief to the taxpayers with respect to the interest component on home loans. Taxpayers can claim a deduction of up to Rs. 2,00,000 for the interest payment on a loan taken for a self-occupied property. If the property is let out or vacant, there is no limit for deduction under this section.
Tax exemption under section 54 (Exemption from capital gains on the sale of a residential house)
This section provides a tax exemption to any individual or HUF when they incur any capital gains on the sale of a residential house that is held by such a person for a period of more than 24 months. The underlying condition for such tax exemption is that the assessee or the taxpayer has to purchase a new residential house from the sale proceed within
- one year before the date of sale, or,
- Two years after the date of sale of the original house, or,
- Construct a new house within three years from the date of sale of the original house.
Tax exemption under section 54EC (Exemption from capital gains on the sale of a long term asset)
Section 54EC provides for tax exemption on capital gains arising out of the sale of a long term capital asset (land or building or both). The assessee or the taxpayer has to invest the profits in bonds of NHAI or REC or any other notified or specified bonds of Central Government. Such investment has to be made within 6 months from the date of sale of the original assets. This section provides a maximum tax exemption of up to Rs.50,00,000.
There are several other sections that can also be utilized for this purpose like section 80EE (Interest payment on home loan for first time buyers), section 80GG (rent paid for accommodation), section 54F (capital gains on the sale of a capital asset other than the residential house), section 80DD (deduction on account of care for any disabled person), section 80U (deduction on account of a disabled person), section 80U (deduction on account of disability of a person), etc.
So, it is good to see what deductions you qualify for before making investments under Section 80C.