5 Tax Savers Over and Above the 80C Limit

It is mandatory for every eligible person to file tax returns every year and pay applicable taxes on their income. The final tax liability will be arrived after relevant computations in consideration with the Income Tax laws. To ensure that the taxpayer benefits and does not end up paying a huge amount of taxes, the Income Tax Act allows various exemptions and deductions. One of the most popular deductions is Section 80C deductions. 

However, there are other sections that can be utilised by the taxpayer to further reduce the taxable income. Read this article to know more about other available deductions. 

How to Reduce Your Tax Liability

One of the most popular modes of deduction is investment under Section 80C. Section 80C consists of several investments and savings options that help you reduce your tax liability by claiming deductions against the amount invested or paid for a predefined purpose. The maximum permissible deduction under Section 80C is Rs. 1.5 Lakhs.

If you think that only Section 80C is there to help you reduce your tax burden, then you are wrong. You can also take advantage of several other options to save taxes. Here are 5 of the most popular tax-saving opportunities that you must be aware of: –

1. Mediclaim Premium Paid under Section 80D

Did you know you can claim a deduction on the medical insurance paid for yourself, spouse, children or parents? Section 80D allows the taxpayer to claim a deduction up to Rs. 1,00,000 against the medical insurance premium paid. The limit of deduction allowed is as follows:

• If the taxpayer and his parents are less than 60 years of age, then a combined deduction of Rs. 50,000 is allowed (Rs. 25,000 each for insurance premium paid). 
• If the taxpayer is less than 60 years and his parents are above 60 years of age, then a combined deduction of Rs. 75,000 is allowed (Rs. 25,000 for the premium of self, spouse and children combined and an additional Rs. 50,000 on the premium of senior parents). 
• However, if both the taxpayer and his parents are above 60 years of age, then a combined deduction of Rs. 1,00,000 is allowed (Rs. 50,000 each for insurance premium paid). 

2. Interest on Education Loan under Section 80E

You can claim a deduction against interest payment for an education loan, which has been taken for higher education of self, spouse or children. This deduction is available for 8 years from when you started interest repayments. There is no upper limit on the deduction amount against interest paid for education loans.

Education loans should have been taken from recognised financial institutions/charitable institutions. Refer this article for more details.

3. Donations Paid under Section 80G

You can claim a deduction of up to 100% or 50%, with or without restriction, of the donations made to funds notified by the Central Government for Section 80G relief purposes. Some popular funds exempt under Sec 80G include the Prime Minister National Relief Fund, CM Relief Fund, LG Relief Fund, Swachh Bharat Kosh, National Defence Fund, and others.

This deduction is also available if the donation has been made for the renovation of religious structures such as temples, mosques, and churches. However, the Central Government must have approved the respective religious institutes' acceptance of donations under Sec 80G. You need to keep the donation receipt safe with you to claim the deduction. Refer this article for more details.

Cash payments above Rs. 2,000/- and payments made in kind are not eligible for deduction. The government has restricted this to prevent misuse.

4. Donations to Political Parties under Section 80GGC

Most political parties collect funds from the general public/corporates to finance their operations. All contributions made to political parties are eligible for deduction without any upper ceiling. That means one can claim a deduction for the entire amount paid to the fund of the political party. However, to be eligible for the deduction, the amount must have been paid in a payment mode other than cash. Refer detailed article for more details.

5. Interest Benefit on housing loans under Section 80EE / 80EEA

Interestingly you can get an additional tax deduction on the interest component of your home loan. To be precise, one can claim an additional deduction over and above the deduction under Section 24 of interest paid towards a home loan. There are two sections governing this deduction: Section 80EE and Section 80EEA. Terms and conditions for both sections are different and are as per below table:

Furthermore, the individual must not have any other property registered under his name when the loan is sanctioned.

These are the five of the most popular modes of deduction under the Income Tax Act which help you save a significant amount of money against your tax liabilities. There are several other options also available for you under different sections. So, you must explore all these options before filing your return to help manage your taxes. Tax evasion is a crime and need not be resorted to when you can legally reduce your tax liability.

Final Word

This are one of the 5 important tax savings instruments apart from Section 80C that taxpayers can use to increase their tax savings and reduce tax liability.  However, it is important to note that these deductions are available only under the old tax regime. Hence, a taxpayer opting for the new tax regime will not be allowed to claim such deductions. Therefore, it is important to understand and choose the correct regime which is beneficial to the taxpayer.