Save Tax : 20 Ways to save Income tax in India

As much long lasted financial year 2021-22 is near to end soon, everyone is getting themselves busy in financial year closing activities. But along with closing of books of accounts, there are some things to be taken care of for the purpose of reducing tax burden and that is nothing but the tax saving investments. All these deduction will be limited to the GTA i.e. Gross Total Income. Below listed are the investments/ expenses that can be made to reduce tax burden/save tax –

1. Donation before 31-03-2022

Any donation done for PM CARES Fund (notified now), PM National Relief Fund or CM Relief Fund is eligible for 100% deduction under Section 80G. The Government of India brought this section 80G donation deduction in order to decrease tax burden of assessee on such income which is donated by them.

2. Life Insurance Premium

You must have paid Life Insurance Premium for self, spouse, children and if the policy is taken after 1/4/2012 then the deduction would be lower of premium paid or 10% of policy value (15% in case of specified disability).

3. Section 80CCD

Section 80CCD relates to the deductions available to individuals against contributions made to the National Pension Scheme (NPS) or the Atal Pension Yojana (APY). Contributions made by the employers towards the NPS, also come under this section. NPS is a notified pension scheme from the Central Government.

80CCD(1B) Maximum Rs 50,000 for investment in NPS Pension fund

80CCD(2) Maximum 10% of basic salary and dearness allowance NPS contribution by employer. State Government employee will be allowed deduction up to 14% for employer contribution in NPS from FY 22-23.

4. Sukanya Samridhi scheme

You must have deposited some amount for a girl child in Sukanya Samridhi scheme and the good news is that it is also eligible for deduction under section 80C. Sukanya Samriddhi Yojana (SSY) is a small deposit scheme for the girl child launched as a part of the ‘Beti Bachao Beti Padhao’ campaign.

Minimum Amount- Rs. 250

Interest accrued and maturity amount – Exempt

5. Home Loan Repayment benefits

In case you are making repayment of loan taken for purchase or reconstruction of House, then deduction will be available only after completion of construction and also in addition to deduction that is being claimed under house property.

6. Other Section 80C deductions

Amount deposited in public Provident Fund, Tuition fees paid for education of maximum 2 children, Fixed Deposit in Bank or Post office for 5 years or more, pension fund of LIC such as UTI/MF or other insurance company.

All above expense/ investment have collective deduction limit of Rs. 1,50,000 u/s 80C, 80CCC and 80CCD(1).

7. Pension scheme

One of the most important deduction for individuals is the contribution to pension scheme of central government where additional deduction of Rs. 50,000 is available over and above the the ceiling of Rs. 1,50,000.

8. Health insurance u/s 80D

If there are any expense of medical insurance premium, central government health scheme, preventive health check up and medical treatment of self, spouse, parents and dependent children then maximum deduction allowed is Rs. 50,000. Deduction allowed for preventive health check up is Rs. 5000 and it shall be allowed even if paid in Cash.

For self, spouse and children (age < 60 yrs ) – Rs. 25,000
For Parents – Father or mother or both (age < 60 yrs) -Rs. 25,000
For self, spouse and children (age > 60 yrs ) – Rs. 50,000
For Parents – Father or mother or both (age > 60 yrs) – Rs. 50,000

9. Education Loan

Deduction can be claimed for 8 years in case of higher studies education loan. So, in case if you have taken education loan, then interest on such loan can be allowed as deduction for total period of 8 years.

10. Equity Linked Savings Scheme (ELSS) Fund

ELSS funds are equity funds that invest a major portion of their corpus into equity or equity-related instruments. Since lock in period is 3 years the income that you earn under this scheme will be considered Long Term Capital Gain. ELSS is a investment to save tax under Section 80C

11. Interest on saving bank account

If you are getting interest on saving bank account then you can claim deduction of such interest income subject to maximum Rs. 10,000 under section 80TTA. However, as per section 80TTB for senior citizen (age 60 or above), the deduction is allowed up to Rs 50,000.. Under section 80TTB, deduction for senior citizens includes-

Interest on saving bank or fixed deposits
Interest on deposits held in a co-operative society engaged in banking business, including a co-operative land mortgage bank or a co-operative land development bank; or
Interest on post office deposits

12. House Rent Allowance

If anyone has been paying rent and your salary structure includes house rent allowance then here is the deduction for you. The amount of deduction would get restricted to least of following:

Actual amount received as HRA.
40% of Salary (50% in case of Metro cities)
Rent amount exceeding 10% OF Salary

The persons who are not receiving HRA can claim house rent deduction under section 80GG which is limited to least of following amount:

Amount of Rs. 5000 per month i.e. Rs. 60000 a year.
Actual rent paid in excess of 10% of total income.
25% of total Income

13. Electric vehicle loan

The new deduction is available in respect of purchase of electric vehicle. Therefore, if you take the loan for purchasing electric vehicle between FY 2019-2020 to FY 2022-2023 then you will be eligible for deduction of interest on such loan subject to maximum of Rs. 1,50,000.

14. Deduction for Premium Paid for Annuity Plan of LIC or Other Insurer-Section 80CCC

This deduction is allowed to an Individual for any amount paid or deposited in any annuity plan of LIC or any other insurer. The plan must be for receiving a pension from a fund referred to in Section 10(23AAB). Pension received from the annuity or amount received upon surrender of the annuity, including interest or bonus accrued on the annuity, is taxable in the year of receipt.

15. Deduction for Rehabilitation of Handicapped Dependent Relative- Section 80DD

The deduction is available to a resident individual or a HUF and is available on:

Expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative
Payment or deposit to specified scheme for maintenance of dependent handicapped relative.
Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000.
Where there is a severe disability (disability is 80% or more) – fixed deduction of Rs 1,25,000.

To claim this deduction a certificate of disability is required from a prescribed medical authority.

16. Deduction for Medical Expenditure on Self or Dependent Relative -Section 80DDB

This deduction can be claimed up to Rs 40,000. For an Individual, such deduction is available in respect of any expenses incurred towards the treatment of certain specified medical diseases or ailments for himself or any of his dependents. The diseases are specified in Rule 11DD of the Income Tax Act. For a HUF, such deduction is available in respect of medical expenses incurred towards the prescribed ailments, for any of the members of the HUF.

17. Deduction on contributions given by companies to Political Parties -Section 80GGB

This deduction is allowed to an Indian company for the amount contributed by it to any political party or an electoral trust. The deduction is allowed for contribution done by any mode other than cash.

18. Deduction on contributions given by any person to Political Parties -Section 80GGC

Deduction under this section 80GGC is allowed to a taxpayer except for a company, local authority and an artificial juridical person wholly or partly funded by the government, for any amount contributed to any political party or an electoral trust. The deduction is allowed for contribution done by any mode other than cash.

19. Deduction for Person suffering from Physical Disability- Section 80U

A deduction of Rs. 75,000 is available to a resident individual who suffers from a physical disability (including blindness) or mental retardation. In case of severe disability, deduction of Rs. 1,25,000 can be claimed.

20. Deduction with respect to any Income by way of Royalty of a Patent -Section 80RRB

One must satisfy the following conditions for claiming deductions against Section 80RRB:

(i) The individual claiming the deduction should be a resident of India.

(ii) Only those individuals that hold an original patent are eligible to apply for deduction under Section 80RRB. If any individual does not hold the original patent, he/she cannot apply for this deduction.

(iii) The patent against which the royalty has been received must be registered under the Patent Act, 1970.

A deduction of up to Rs. 3.00 Lakhs can be claimed against royalty payments. This amount is the maximum amount that can be claimed as a deduction. If the actual royalties received are less than Rs. 3 Lakhs, then only that much amount would be eligible for deduction.

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The author of the above article is CA Rahul Gaur.

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