Tax saving we believe that Section 80C offers the best tax breaks available in India. But that isn’t the reality. There are numerous other methods to reduce taxes, all of which we have compiled in this blog:
1. House Rent Allowance
The House Rent Allowance, or HRA, is a great method to reduce your tax liability, to start with. The reason for this is that HRA is exempt from taxation. However, this is limited to
- to employees opting for the Old Tax Regime,
- residing in rented accommodation and
- paying rent to their respective owner.
By providing documentation of rent paid to the employer or at the time of filing income tax returns, the employee can claim the exemption from HRA.
Having stated that, the amount of HRA exempted from the income tax is the least of the following:
| S.No. | Particulars |
|---|---|
| a) | HRA received from an employer |
| b) | Actual rent paid less 10% of basic monthly salary |
| c) | 50% of basic salary, if taxpayer is living in a metropolitan city |
| d) | 40% of basic salary, if taxpayer is living in a metropolitan city |
2. Interest on home loans
Second, an individual who chooses the Old Tax Regime may deduct interest paid on a housing loan from gross total income under the Income Tax Act. The amount of interest on housing loans for people purchasing homes under affordable housing schemes was increased from Rs. 2 lacs to Rs. 3.5 lacs through the July 2019 budget. Furthermore, this scheme was extended through the Union Budget of 2021 until March 31, 2022.
Furthermore, you can deduct up to Rs 1.5 lakh from the principal (of the loan) under Section 80C of the Act, and up to Rs 2 lakh from the interest paid under Section 24 of the Act annually.
Also, under Section 80EEA, first time home buyers can claim a deduction of up to Rs. 1,50,000, subject to certain conditions.
Read also: Income Tax planning Tips for Salaried Employees FY 2023-24
3. Life Insurance tax savings
Thirdly, one of the essentials to safeguarding your life and the lives of your loved ones is life insurance. Section 10(10D) of the Income Tax Act exempts investments made in life insurance from taxes, and Section 80C allows for a tax deduction.
Section 10(10D) of the Income Tax Act grants exemption on the income tax under two categories, which is as follows:
| Particulars | Life Insurance Premium | Premium Criteria |
|---|---|---|
| Section 10(10D) | The insurance policy was issued on April 1, 2003, or later, but no later than March 31, 2012. | The premium payable, exceeds 20% of the actual capital sum assured, for any of the years (during the term of the policy). |
| Section 10(10D) | The insurance policy issued on or after 1st April 2012 | Throughout the duration of the policy, the premium that must be paid for any given year will exceed 10% of the actual capital sum assured. |
On the other hand, you may deduct up to Rs. 1.5 lacs in taxes from the premiums you pay for a life insurance policy under Section 80C.
Both the Old and New Tax Regimes allow for the exemption under Section 10(10D). However, the Section 80C deduction is only available under the previous tax regime.
4. National Pension System Contribution
Fourth, anyone between the ages of 18 and 60 who is a resident or non-resident and chooses to invest in the National Pension Plan may do so under either the old or new tax regime. According to the Income Tax Act, a person can reduce their tax liability by claiming deductions under Sections 80CCD(1), 80CCD(2), and 80CCD (1b).
5. Medical Insurance
Fifthly, as per section 80D of the Income Tax Act, every individual who wishes to opt for the Old Tax Regime can claim a deduction for medical insurance. Having said this, the assessee has to make the payment through Cheque.
6. Education Loan Interest
Section 80E of the Act exempts interest paid on education loans, which make up part of your EMI, from taxation. However, the maximum length of this tax deduction is eight years, or until the interest is paid back, whichever comes first. That being said, depending on who decides to pay the loan, either the parent or the child, or student, may take advantage of this tax benefit. Taxes do not apply to the entire amount of education loans.
This deduction is available only under the Old Tax Regime.
Read also: Here’s why Indian taxpayers prefer old income tax regime over new tax regime
7. Deductions for donations made
Subject to specific requirements, donations made to trusts and organizations may qualify for a tax deduction. Furthermore, the contributions made under Section 80G can be broadly divided into the following four categories:
100% deduction (no minimum qualifying amount)
Donations in the first category are 100% tax deductible and are not contingent upon meeting any qualifying requirements. Deductions of this kind are allowed for contributions made to the Prime Minister’s National Relief Fund, the National Defense Fund, the National/State Blood Transfusion Council, and The National Foundation for Communal Harmony.
50% of the deduction (no qualifying limit)
Donations to trusts such as the Indira Gandhi Memorial Fund, the National Children’s Fund, and the Prime Minister’s Drought Relief Fund fall into the second category and are eligible for a 50% tax deduction on the amount donated.
100% of adjusted gross total income is deducted (subject to 10%).
The Indian Olympic Association and local governments that support family planning through donations are eligible for deductions under the third category. Only 10% of the donor’s Adjusted Gross Total Income may be deducted in these circumstances. Any donations over this amount are rounded to the nearest 10%.
50% of adjusted gross total income is deducted (up to 10%).
Deductions under this category are available for contributions made to any local government or authority that would subsequently use the funds for any charitable purpose. Only 10% of the donor’s Adjusted Gross Total Income may be deducted in these circumstances. Moreover, gifts over this threshold are limited to 10%.
8. Income through interest on savings account (< 60 years)
| Particulars | Income Exempted (Below 60 years) | Income Exempted (Above 60 years) |
| Income through interest on savings account | Rs.10,000 | Rs. 50,000 |
Interest on savings account deposits allows both individuals and HUFs choosing the previous tax system to deduct expenses. Section 80TTA of the Income Tax Act, 1961 allows individuals under 60 years of age to claim a deduction for up to Rs. 10,000 in interest earned on savings accounts.
9. Interest earned on savings account (above 60 years old)
Under Section 80TTB of the Act, interest income up to Rs. 50,000 can be deducted from your income if you are an individual over 60.
Read also: Income tax dept sent mass messages to ITR filers relating to high value transactions
10. Deduction for disabled individuals
People with any of the specified disabilities are eligible for additional deductions under Section 80U of the Income Tax Act. In addition, a deduction based on the severity of the disabled person’s disability is given on the individual’s gross total income.
The quantum of deduction under Section 80U are as follows:
| Disability | Level of disability | Amount |
|---|---|---|
| Normal disability | 40% or above | Rs. 75,000 |
| Severe disability | 80% or above | Rs. 1,25,000 |
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