The Government of India provides numerous tax-saving investment options to its citizens. From Public Provident Funds to Equity Linked Savings Schemes, there are many investment options you can choose from to maximise your tax savings. There are other avenues as well to save tax, such as buying a health insurance or paying interest on an education loan. Here, we cover some of the tax-saving options and their benefits under the Income Tax Act so that you can reduce your tax liability.
Under Section 80C of the Income Tax Act, you can claim tax deductions of up to Rs. 1,50,000 per year. You can make investments in debt instruments such as Public Provident Funds, Employee Provident Funds, Sukanya Samriddhi, Senior Citizen Saving Scheme and Tax Saving Fixed Deposits.
If you want to make market-linked investments, then investments in Equity Linked Savings Schemes and Unit Linked Insurance Plans can also help you save tax. If you plan to invest in Equity Linked Savings Scheme you can also start investing every month through ELSS SIP so you can start benefitting from your investments through the year and also benefit from the power of compounding.
Additionally, under this section, certain expenses such as children’s tuition fee payments, premiums paid for life insurance, and home loan principal repayment can also be claimed as deductions.
Under Section 80CCC, you can claim deductions for contributions to specified pension plans. This comes within the Section 80C limit.
Contributions to the National Pension Scheme Tier I can be claimed as deductions under this section. It allows for a deduction of up to Rs. 50,000 per year. This limit is over and above 80C.
If you buy health insurance for yourself or your parents, you can claim the premium payments as deductions under Section 80D. If you or your parents are below 60 years of age, then a maximum of Rs. 25,000 can be claimed. You can claim up to Rs. 50,000 each year if you or your parents are over the age of 60.
Under Section 24 of the Income Tax Act, you can claim up to Rs. 2,00,000 on the interest paid on a housing loan or home loan improvements.
Under Section 80E, you can claim the interest paid on education loans. There is no limit on the amount you can claim.
Section 80TTA allows for deductions of up to Rs. 10,000 on savings account interest. Section 80TTB allows deductions of up to Rs. 50,000 for senior citizens on savings account interest.
Section 80DDB allows deductions of up to Rs. 40,000 for treatment of certain illnesses for self and dependants under the age of 60. For those over 60, deductions of up to Rs. 1,00,000 can be claimed.
If you have a handicapped dependent, then you can claim up to Rs. 1,25,000 under Section 80DD for over 80% handicap. If the handicap is below 80%, then a deduction of Rs. 75,000 can be claimed.
As long as the deduction does not exceed 10% of gross income, 50% to 100% of donations to approved institutions can be deducted as a tax deduction under Section 80G.
One must note that these sections, the limits, the conditions (if any) are subject to changes from time to time and one must check for its availability and eligibility before exercising a decision.
With these investments and expenses, you can maximise your tax savings.