Thinking of saving on taxes? You must already know about deductions applicable under Section 80C which cover most of the commonly made investments that we make. Yet, there are several other tax-saving options other than deductions under Section 80C that you should certainly consider.
Here’s taking a closer look at the same:
- National Pension System (NPS) – The NPS was launched by the Central Government in the year 2009 and every subscriber is required to open an account with the CRA (Central Record keeping Agency) which will be identified via the PRAN or Permanent Retirement Account Number. The NPS offers extra tax deductions for investments up to Rs. 50,000 in a financial year under Section 80CCD (1B). This is over and above the deduction of Rs. 1,50,000 under Section 80C. The return depends on the asset class that is selected.
- Rajiv Gandhi Equity Savings Scheme- This scheme enables tax deductions under Section 80CG although first-time investors are only allowed to invest for getting tax benefits. The maximum investment can be up to Rs. 50,000 in approved stock units. Not many people know of this particular tax-saving avenue although it still exists.
- Interest repaid on education loans- Under Section 80E, deductions are allowed for the interest component of the education loan that is being repaid and not on the loan’s principal component. This deduction comes over and above the threshold under Section 80C and there is no cap on the deductions to be claimed under Section 80E. This is another tax-saving scheme that not many people are aware of. Parents will benefit if they take loans on behalf of their wards in case the child is not taxable yet. This will help them save on taxes immensely.
- HRA- House Rent Allowance (HRA) can get you deductions under Section 80GG of the Income Tax Act in case you are paying rent and staying in a rented home or apartment. The deduction amount is based on the city where you stay. This is a major tax-saving avenue for salaried professionals.
- Home Loan- Under Section 24, you can get tax deductions up to Rs. 2 lakh on the interest repayments made for your home loan in a financial year. An extra deduction of Rs. 50,000 can be claimed on home loan interest under Section 80EE from FY2016-17 onwards. Yet, this deduction requires the fulfillment of specific conditions. The principal amount of the home loan is anyway eligible for tax benefits up to Rs. 1.5 lakh under Section 80C as you must know already.
- Savings account interest- Interest that you earn from a savings account or even from a post office savings account, will be eligible for deductions under Section 80TTA. The maximum amount to be claimed as deduction is Rs. 10,000. This does not equate to interest of Rs. 10,000 being exempted income. It has to be mentioned as income from other sources in the ITR and then you can claim this particular deduction.
- Health Insurance- Availing of a health insurance policy will help you save taxes up to Rs. 25,000 and Rs. 30,000 in case of senior citizens. This benefit is offered under Section 80D and the benefits cover expenses on preventive health check-ups as well.
- Donations- Amounts that you donate to NGOs are eligible for tax deductions under Section 80G. However, this is applicable only when the donation is made via draft or cash. The deduction can be 50/100% and can be claimed when you are filing your income tax return (ITR) and quoting the PAN number is a must to the NGO where you donated money. There is a full list of institutions where you can donate your money for getting tax exemptions.
- Payment of premiums for medical insurance- Under Section 80D, you will get deductions on health insurance as mentioned already. You can purchase a policy not just for yourself but also for your spouse, children or dependent parents. If you belong to a HUF (Hindu undivided family), then the policy can be taken in the name of any family member. The premium should be paid by any method other than paying in cash and the insurer should have approval from the IRDAI and Central Government. You can now get deductions up to Rs. 1 lakh in total although sub-limits have to be carefully ascertained. Your maximum deduction can be Rs. 25,000 on health insurance premiums paid for yourself, spouse and dependent children. An added deduction of Rs. 25,000 is applicable on premiums paid for elderly parents. For senior citizens, depending on certain conditions, a maximum deduction up to Rs. 50,000 can be claimed in a particular financial year as well.
These are thus the key avenues for obtaining tax deductions other than the ones applicable under Section 80C. You should closely observe these tax-saving channels and make your investment plans accordingly.