Top 8 Tax Saving Tools

“In this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin

If taxes are so certain, it seems only wise that we pay it timely and honestly. When it comes to filing returns, so many taxpayers are keen to save their taxes but very few plan it ahead. Tax planning makes sure you don’t end up overpaying your taxes. But you need to have a proactive approach while gearing up for filing your returns.

Most of the people believe that investments made under section 80C are the whole-sole of tax savings. But this is a misconception. There’s more to tax savings than section 80C investments. You can save taxes when you donate to charity, invest in your child’s education or even when you suffer a loss in business. Here are some common and uncommon tax deductions that can help you slash off you taxable income substantially.

  1. Deductions Under Section 80C

Section 80C is perhaps the most important tax saving tool for taxpayers, so much so that it has become synonymous with tax deductions. Most of the income tax saving investments comes under section 80C. Take a look –

  • Contribution to Provident Fund
  • Life Insurance premium
  • National Savings Certificates
  • Equity Linked Saving Scheme (ELSS)
  • Investment in ULIPs and Infrastructure Bonds
  • National Pension Scheme
  • Principal Part of Housing Loan
  • Post Office Term Deposit

There are other modifications of this section to make way for other investments as well. Money put in pension plan and new pension scheme is tax deductible under section 80CCC and section 80CCD respectively. Kindly note that the upper cap on the total deductions made under sections 80C, 80CCC and 80CCD is Rs. 1,00,000.

  1. Medical Insurance Premium

From a financial perspective, a health insurance cover acts a saviour in distressing times. The good news is that under section 80D, the premium paid for medi-claim policies is subject to a tax deduction of up to Rs. 20,000 for senior citizens, up to Rs. 15,000 for self/spouse/dependent children and up to Rs. 5,000 for preventive health check-ups, making it a total of Rs. 40,000. That’s a lot of tax saved!

Also, under section 80DDB, a taxpayer can claim a deduction up to Rs. 40,000 (Rs. 60,000 for senior citizens) for expenses incurred on medical treatments.

  1. Interest on Education Loan

Under section 80E, if you have taken an education loan for self /spouse/child, you can claim a deduction on the interest amount payable on the loan. This deduction is approved only for the loans taken for higher studies in India or abroad.

  1. Savings Account

We all deposit our earnings in our savings account in a bank/post office. You must know that under section 80TTA, the interest earned on your savings account is tax exempted.

  1. Disability

Under section 80U, the government provides a tax deduction of Rs. 50,000 for disabled persons. For claiming the deduction, one has to provide a 40% disability certification. The deduction is extended up to Rs. 1,00,000 for those suffering from severe disability. The deduction is flat and is given irrespective of the expenses incurred.

  1. Interest on Housing Loan

You might have noted earlier, the principal component of your home loan is tax deductible under section 80C. But here’s what you might not know. Under section 24, the interest component on your home loan also qualifies for a tax deduction up to a maximum limit of Rs. 1,50,000. To make it even better, if you are one of the co-borrowers of the housing loan with your spouse/sibling/parent, you can still claim a deduction in proportion of your respective loan amount.

  1. House Rent Allowance

This one is applicable for salaried individuals. If House Rent Allowance (HRA) is a part of your salary, you can claim a deduction of the following (whichever is lesser) – total HRA received, 40% of basic salary or rent paid above 10% of basic salary. However, if HRA is not a part of your salary, you can still claim a deduction under section 80GG of the following (whichever is lesser) – Rs 2,000 per month, 25% of the total income or rent paid above 10% of total income.

As a landlord, you can claim a deduction of 30% on the annual amount you receive as rent under Section 24 (for maintaining the house).

  1. Donations for Charity

Thinking of a charity of late? Go ahead, putting money to charitable use not only builds up karma, as they say but also brings you substantial tax savings. Under section 80G, a taxpayer can claim a deduction of 50% – 100% of the donations made, subject to the condition that he donates the money to a government recognized institution/NGO and provides the original receipt.

It must have become quite obvious by now that a taxpayer has a multitude of tax saving instruments to choose from. While some of them are widely known, others might not be very popular but nonetheless as effective in saving substantial income tax. Keep those in mind the next time you file your tax return and get the most of your investments!


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