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"A penny saved, is a penny earned" this saying does apply to tax savings. After all, if you pay less to the tax authorities, you have more money left over to reach other financial goals. The problem is when it comes to tax planning we often focus primarily on Section 80C deductions up to the total limit of Rs. 1.5 lakh annually. This is where knowing other tax saving options can come in handy and help you reduce your tax liability even further.
Read on to know about some relatively lesser known tax saving options beyond Section 80C that you can use to reduce your income tax payout.
What are the Tax Saving Options Other than 80C?
Opting instruments in addition to the common Section 80C investment options give you the opportunity to boost your tax savings significantly. However, do keep in mind that opting for additional investments does mean that your disposable income might decrease a bit in the short-term. But in the long term, you may be able to reap significant benefits that can help you secure your financial future.
Here is a short list of tax-saving options beyond Section 80C that you can consider to decrease your tax liability for the financial year:
Applicable Section |
Income Tax Deduction for AY (2021-22) |
Exemption Limit Limit for AY (2021-22) |
Section 80CCD(1B) |
Atal Pension Yojana and National Pension Scheme Tier 1 Account Contribution |
Up to Rs. 50,000 annually |
Section 80CCD(2) |
National Pension Scheme Contribution by Employer |
Amount contributed( max. 14% of basic salary + dearness allowance) |
Section 80D |
Medical Insurance Premium and Medical Expenditure |
Up to Rs. 1 lakh annually for senior citizen self + parent |
Section 80E |
Interest paid on Educational Loan |
100% of interest paid up to 8 year from date of loan sanction |
Section 24 |
Interest paid on Home Loan |
At actuals (max. limit of Rs. 2 lakh annually) |
Section 80EE |
Interest paid on Home Loan by first time buyer purchasing affordable housing |
Up to Rs. 50,000 annually in addition to Section 24 limit |
How To Avail Tax Saving Options other than 80C
In order to avail the tax benefits of the various sections other than Section 80C mentioned above, you would need to make certain investments or expenses. The details of such tax saving investments and expenses that you need to make are as follows:
In order to avail the tax benefits of the various sections other than Section 80C mentioned above, you would need to make certain investments or expenses. The details of such tax saving investments and expenses that you need to make are as follows:
- NPS Tier 1 Account Investments
If you are looking to avail the tax benefits of Section 80CCD (1B), you can invest up to Rs. 50,000 annually in Tier 1 account of the NPS. This benefit is in addition to the tax benefits of NPS under section 80C. Also, under this section, you can use NPS for the limit of Rs. 1.5 lakhs. This mix of opportunities will help you avail a total tax deduction benefit of up to Rs. 2 lakh annually.
- Corporate NPS Account
If your employer offers you the opportunity to avail a Corporate NPS account, you can look forward to availing additional tax benefits u/s 80CCD (2) of the Income Tax Act. This tax benefit is in lieu of the employer contribution to your Corporate NPS account with a maximum limit of up to 10% of your basic salary plus DA annually and up to 14% for Government Employee subscribing to Government NPS account. This contribution provides tax benefits in addition to the total Rs. 2 lakh NPS tax benefit u/s 80CCD (1) and 80CCD (1B) mentioned above.
- Purchase Health Insurance Premium for Section 80D Benefits
Getting insurance for your health can save you a significant amount in future medical expenses. In addition, health insurance premiums offer tax deduction benefits under Section 80D. This 80D benefit can also be availed in the case of mediclaim policies and critical illness riders of health policies.
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However, the limitation for claiming tax deductions under section 80D depends on the age of individuals covered under the health insurance plan. Below are details of the 80D deductions that can be availed:
Covered Individual(s) |
Maximum 80D Deduction Allowed |
Self (Less than 60 years) + spouse + up to 2 dependent children |
Rs. 25,000 |
Self (60 years and older) + spouse + up to 2 dependent children |
Rs. 50,000 |
Self (Less than 60 years) + spouse + up to 2 dependent children + dependent parents/in-laws (less than 60 years) |
Rs. 50,000 |
Self (Less than 60 years) + spouse + up to 2 dependent children + dependent parents/in-laws (60 years and older) |
Rs. 75,000 |
Self (60 years and older) + spouse + up to 2 dependent children + dependent parents/in-laws (60 years and older) |
Rs. 1 lakh |
The above limit also includes Rs. 5,000 tax deduction u/s 80D allowed for expenses for preventative diagnostic tests.
- Repayment of Education Loan Under Section 80E
In this era, applying for education loans for higher studies has become quite common. The students who have applied for educational loans are offered tax benefits on the repayment of interest on their student loans under Section 80E of the Income Tax Act. Parents or students can avail of this tax-saving option benefits based on who pays back the educational loan amount. However, this benefit can only be availed when you apply for an education loan from recognized institutions and for a period of up to 7 years post loan allocation. The entire interest repaid for the loan can be claimed as a tax deductible expense.
- Home Loan Interest Repayment Under Section 24 (b)
A taxpayer with a home loan can easily claim tax deductions under section 24 (b) of income tax. It will help you benefit from the home loan's interest repayment. The maximum deduction that you can avail from this tax benefit is ₹2 lakhs annually. This Section 24 (b) tax benefit is in addition to the 80C benefit that you can avail by repaying the home loan principal.
- Interest Repayment Tax Saving Option for First-Time Home Loan Borrowers Under Section 80EE
For a first-time homeowner or a taxpayer, you can avail of income tax saving options of up to ₹50,000 under section 80EE. This amount is in addition to the ₹2 lakh for interest repayments on home loans under Section 24(b) of the Income Tax Act. The eligibility criteria for claiming deduction under this section include the value of the house being less than ₹50 lakh, and the loan amount should also be ₹35 lakh or less. Under existing tax rules, this additional benefit on home loan u/s 80EE is only available on loans sanctioned between 1st April 2016 and 31st March 2017.
Conclusion
Happiness is having the option of saving the deducted amount from your hard-earned money. There are plenty of income tax saving investments via which you can save a few bucks and you must understand these options carefully. Other than section 80C, there are numerous options via which you can save an extra buck and increase your total wealth over time. Most of these tools even serve as investment tools.
FAQs
1. What is income tax liability?
Income Tax liability refers to the obligation of an income-earning individual/business to pay the specified amount of tax on their profits or income to the government during a financial year. The government levies tax rates based on profits or the source of income of the individual/business. The actual tax payable depends on the income tax slab the tax payer falls on based on their annual income.
2. How to calculate income tax liability?
The below-mentioned formula calculates the taxable income that is the basis of tax liability:
Taxable Income = Total Gross Income – Deductions - Exemptions
The income tax liability is calculated by applying the income tax slab rate to the taxable income calculated in the earlier step. You can use a free online income tax calculator to estimate your income tax liability with minimal effort.
3. Under section 80D what is the maximum benefit that you can?
The maximum tax deduction benefit currently available under Section 80D is Rs. 1 lakh annually. This is allowed for health insurance premium payment by a tax payer who is a senior citizen and also pays the health insurance premium for senior citizen parents.
4. Who can claim HRA tax benefit?
Salaried individuals can claim HRA tax benefit under current income tax laws if there is a house rent allowance (HRA) component in their salary. If a salaried individual does not have a HRA component in his/her salary, tax benefit of up to Rs. 60,000 can be claimed annually under Section 80GG.
5. What are the key documents that are necessary to correctly file income tax return (ITR)?
To file an income tax return, you should have the below-mentioned documents handy:
● PAN/Aadhaar card
● Investment proof in tax-saving options
● Certificates of interest from banks/post offices
● Proofs to make claims under the various sections
● Form 16
The above list is not exhaustive and depending upon your unique situation you might require additional documents to file ITR.
Sources:
https://tax2win.in/guide/deductions
https://www.goodreturns.in/personal-finance/best-5-tax-saving-investment-options-other-than-80c/articlecontent-pf31821-1243549.html
https://www.etmoney.com/blog/beyond-section-80c-10-ways-to-save-taxes/
https://www.hdfcbank.com/personal/resources/learning-centre/save/five-tax-saving-options-other-than-80c
https://www.icicidirect.com/knowledge-center/article/tax-saving-options-beyond-section-80c
ARN No: Nov22/Bg/14
