Tax Saving Options Other Than 80C

The income that you earn will undoubtedly increase as the years go by. As you move from one promotion to the next, your inflow of income will also rise. Correspondingly, so will the tax rate applicable to you as per the Income Tax Act, 1961. This effectively means a higher tax liability.

 

Fortunately, the Income Tax Act also has several provisions to reduce the tax burden. Some of the major tax saving provisions are contained within section 80C. There are also tax saving options other than section 80C deduction.

 

Let us look at what this important section includes and explore the alternative ways to save tax other than Section 80C.

Section 80C of the IT Act allows a deduction of up to Rs. 1.5 lakhs per annum. The deductions are applicable to eligible taxpayers for various investment options and expenses incurred. The subsections of Section 80C include sections 80CCC, 80CCD (1), 80CCD (1b) and 80CCD (2).

 

Here is a preview of the eligible investments and expenses that come within the Rs. 1.5 lakh limit under section 80C.

• Investment in Equity Linked Savings Scheme (ELSS) funds

• Investment in Unit Linked Insurance Plans (ULIPs)

• Investment in Public Provident Fund (PPF)

• Investment in the National Pension System (NPS)

• Investment in Tax-saving Fixed Deposits

• Investment in Sukanya Samriddhi Yojana

• Life insurance premiums

• Tuition fees paid for your children’s education (up to a maximum of 2 children)

• Repayment of home loan principal

If you do not have any of the investments or the expenses under Section 80C, can you still save tax? The answer is yes. There are many tax exemptions other than Section 80C included in the Act. Some of them being:

Here is an overview of how to save tax other than Section 80C -

As you can see from the table above, there are many different sections aside from 80C that offer tax benefits. Here is a closer look at the details of these tax saving provisions.

• Section 80EE: Payment of interest by first-time home buyers for home loan

If you are a first-time house buyer i.e, never owned a house before, then you can claim for tax deduction up to Rs.50,000 u/s 80EE. This deduction comes above the Rs.2 lakhs tax benefit for housing loan interest repayment under Section 24.

 

The condition that has to be met to enjoy this deduction is that the house valuation should be lesser than Rs.50 lakhs and the home loan amount should have to be Rs.35 lakhs or lesser. Additionally, the loan has to be approved between 1st April, 2016 and 31st March,2017.

• Section 80CCD: National Pension Scheme (NPS)

Apart from the Section 80C contribution of Rs.1.5 lakhs, you can additionally invest Rs 50,000 in the National Pension Scheme that can be claimed as deduction of tax u/s 80CCD. This gives you the opportunity to claim up to Rs,2 lakhs in tax deduction each year by investing in the NPS.

• Section 80D: Premium for health insurance payment

U/s 80D of the IT Act, you can claim for a deduction for the premium paid for yours as well as your family member’s health insurance. 80D allows you to claim a deduction of up to Rs.25,000 on the premium paid for your spouse, your children and yourself. An additional deduction of up to Rs.25,000 can be claimed if you are paying for the premium of your parents, making the total deduction to Rs.50,000.

 

Additionally, in case the individual is below the age of 60 years with parents who are above the age of 60 years, the maximum deduction cap is Rs.75,000 under this section. In case, both the individual and the parents are above the age of 60, then the deduction claim goes up to Rs.1 lakh.

The money spent on preventive medical check-ups are also eligible u/s 80D with the maximum limit of up to Rs.5,000 for family or self.

• Section 80E: Education loan repayment

The amount that is paid for education loan interest for children ,spouse, self or children, can be claimed for deduction under 80E. There is no cap to the amount that can be claimed in a financial year. The deduction can be claimed from the time you repay the educational loan to the next seven years or up till the entire interest is paid. Additionally, this deduction for tax can be claimed only in case the loan is taken from a reputable financial institution and not from friends or relatives. It can be claimed only if the educational loan is taken for higher education.

• Section 24: Home loan payment interest

As a taxpayer, you can claim the amount that is paid as interest for home loan u/s 24 of the IT Act. The maximum cap under Section 24 is Rs.2 lakhs which can be claimed on home loan interest payment for a self-occupied house but in case you are not occupying the house and it is rented out then there is no maximum cap, and you can get the entire amount of interest as a tax deduction.

• Section 80EEB: Loan interest for electric vehicle purchase

In case you take a loan for an electric vehicle purchase, then you are eligible to claim a tax deduction of Rs.1.5 lakhs under this section of the Income Tax act. The condition that needs to be met in order to claim this deduction is that the loan for the vehicle purchase should be approved between 1st April, 2019 and 31st March, 2023.

• Section 80G: Charity donations

Donations that are made to government-approved institutions for charity can be claimed for tax deduction under Section 80G. This donation can be for renovation of a worship place such as a mosque, church and temple. To enjoy the tax benefit under 80G, you should have donated by cheque as cash donations above Rs.2,000 do not qualify for deductions from FY 2017-18. Some funds that are approved by the government are Clean Ganga Funds, National Defence Funds, etc.

• Section 80GG: Accommodation rent

Deductions can be claimed under this section only if you do not get house rent allowance(HRA) as a component in your salary or in case you are a self-employed individual. To enjoy this deduction, you have to submit a 10BA Form. You are eligible to claim a deduction of up to Rs.60,000 u/s 80GG.

• Section 80TTA: Saving Bank Account interest

Deductions under this section can be claimed up to Rs.10,000 for the interest income that you get from a savings bank account with a post office, co-operative society or a banking company.

• Section 80TTB: Senior citizens deposit interest

Deductions under this section can be claimed by an elderly citizen of up to Rs.50,000 for the interest income that they get from deposits with a post office, co-operative society or a banking company.

• Section 54: Capital gain from residential house sale 

This deduction is available to HUFs as well as individuals who get profit on a residential house sale (which is owned by the assessee for more than 2 years) and purchase a new house from the profit within a year before the sale date or 24 months after the sale date of the original house or build a new residential house within 36 months from the sale date of the original house.

• Section 54EC: Capital gain from building sale, land sale or both

This deduction is available in case you get a profit from a long-term capital asset sale i.e, building or land or both and if you invest that profit in bonds of REC or NHAI or other bonds by the Central government within 180 days from the sale date of the asset. Maximum deduction allowed under Section 54EC is Rs.50 lakhs.

• Section 54F: Capital gain from capital asset sale other than that of a residential house

This deduction is available to HUFs as well as individuals who get profit from a capital asset sale other than that of a residential house ( that is held by the assessee for more than 2 years) and then use this profit to purchase a new house within 12 months before the sale date or 24 months after the sale date of the original residential property or build a new house within 36 months from the sale date of the original property.

 

As a taxpayer, you should be aware of tax saving options other than 80C deductions. The objective of tax saving should be done without impacting your financial health. For example , you should not be taking a home loan just because you can claim for tax-savings. So, make sure to use the available tax deductions wherever necessary and reduce your liability of income tax.