The financial year end is just about four months away, and it’s time to get going on your tax-saving investments if you haven’t done so yet. Now, besides the usual Section 80C instruments (up to ₹1.5 lakh a year), there are other ways to deploy money and save tax. Use these too to good effect.
But note that like Section 80C of the Income-Tax Act, other tax breaks are also only for those in the existing tax regime (that has higher tax rates along with benefit of tax deductions and exemptions).
Here are some key tax breaks beyond Section 80C.
Not only are investments in NPS – Tier 1 allowed under Section 80C – you can also put an additional ₹50,000 and claim tax deduction under Section 80CCD. This can translate into annual savings of ₹2,600 for those in the 5 per cent tax slab, going up to ₹15,600 for those in the 30 per cent tax slab. While the tax break is a sweetener, the NPS is a cost-effective pension plan to help you provide for post-retirement income.
Given the high cost of medical treatment, it’s always good to have adequate health insurance cover for yourself and the family.
It helps that Section 80D gives a deduction of up to ₹25,000 a year for the premium you pay to get health insurance for yourself, your spouse and your dependent children; this goes up to ₹50,000 if any of you is a senior citizen. If you pay the premium to cover your parents, you get an additional deduction of up to ₹25,000 a year (₹50,000 if either of your parents is a senior citizen).
Expense on preventive health check-ups are also eligible for deduction up to ₹5,000 a year. This is part of the overall limit.
Donate to institutions and funds approved by the Government — these get you deduction under Section 80G of the Income-Tax Act. Give money; you won’t get the benefit if you give in kind such as food items, clothes and utensils. Also, cash donation is eligible only up to ₹2,000 a year. So, if you want to give a larger sum, give via non-cash modes such as cheques or online transfers.
Donations to many Government-run entities are fully deductible from taxable income, but the deduction is limited to 50 per cent of the donation to most non-Government entities. This tax break may be further limited to 10 per cent of your adjusted gross total income.
Interest on loans
Interest paid on education loans and home loans also help save taxes.
Section 80E allows deduction of the interest paid on loans to fund your education or that of your spouse, children or someone you take care of as a legal guardian. The loans must fund a Government-recognised course of study.
The deduction is allowed if the loan is taken from an approved financial institution or an approved charitable institution. You can claim the tax break for a maximum of eight years — starting from the year you start paying the interest on the loan.
Servicing your home loan gets you two tax benefits. One, repayment of principal is eligible for tax deduction under Section 80C up to the overall limit of ₹1.5 lakh a year.
Next, the interest payable on a loan taken to buy, construct, repair, renew or reconstruct your house is allowed as deduction under Section 24. The interest deduction for self-occupied homes is restricted to ₹2 lakh a year. For let-out and deemed let-out properties, there is no restriction on the annual interest amount. But the overall loss from house property cannot exceed ₹2 lakh a year; the balance loss can be carried forward for set-off for up to eight assessment years.
Besides, interest payable on the loan till the house is acquired or constructed is also allowed as deduction. This can be claimed in equal instalments for five years from the year in which the property is acquired or constructed. This deduction though is subject to the ₹2 lakh overall limit.
Interest on loans on let-out property is allowed even in the new tax regime, but subject to certain restrictions.
Interest on bank/PO accounts
Interest on savings deposits with banks, post office or co-operative societies have to be declared as income. But Section 80TTA allows deduction of such interest up to ₹10,000 a year. This benefit is not available on interest from other deposits such as fixed deposits.
Senior citizens get a higher benefit. Under Section 80TTB, their interest income on deposits (including fixed deposits and savings account deposits) is eligible for deduction up to ₹50,000. But with this, the ₹10,000 deduction under Section 80TTA will not be allowed.
Besides, there are other deductions such as contribution to political parties under Section 80GGC, medical expenses incurred to treat specified illnesses under Section 80DDB, and medical expenditure incurred on disabled dependents under Section 80DD; these are subject to certain conditions and limits.
Also, subject to conditions and limits, salaried employees are eligible for tax breaks on incomes such as HRA (house rent allowance), leave travel allowance and leave encashment on quitting the job. Salaried employees also get standard deduction of up to ₹50,000 a year. Read more on these tax breaks in the link below https://tinyurl.com/y6rg3ccc