5 Tax Savers Over and Above the 80C Limit

Paying your taxes honestly is the duty and responsibility of every Indian citizen. The amount you pay as Income tax goes into building the country's infrastructure and boosting the economy. You must make it a point to file your income tax returns on time and pay your tax liabilities.

But paying taxes honestly does not mean you cannot save taxes by utilising the legitimate means provided by the tax laws. Saving money is necessary for your future and present requirements. Keeping in mind the needs of every citizen, the government has offered several deductions that can be claimed to reduce your tax liability. 

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. 1.50 Lakhs.

If you think that only Sec 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

Life is uncertain; therefore, in the current scenario, having a Mediclaim policy is a must for every individual. Many Mediclaim policies not only safeguard you against possibly exorbitant hospital bills but also offer reimbursement for your sick period. This saves you from unexpected expenses as well as possible loss of income. There is one more benefit of subscribing to a Mediclaim policy, and that is a tax deduction. Under Sec 80D, you are eligible for a deduction up to Rs. 75,000/- if you have purchased medical with the following conditions: –

• The insurer must be registered and recognised by IRDA.
• The maximum deduction for a mediclaim policy for an individual, his spouse and kids is Rs. 25,000/-
• An additional deduction of up to Rs. 25,000/- for the premium paid for a parent's Mediclaim policy is also available. 
• If the individual for whom the medical policy premium is paid is a senior citizen (i.e., more than 60 years of age), then the deduction amount  is increased to Rs. 50,000/-
• You should only pay the premium through recognised banking channels to avail of the deduction.
• A deduction of Rs. 5,000/- is also available for expenses on preventive health check-ups.

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, i.e. for undertaking undergraduation or postgraduation. This deduction is available for 8 years from when you started interest repayments. (Generally, repayment of the education loan begins after course completion.) 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. The money should have been used for the education of oneself, spouse, kids or someone under your legal guardianship. Refer detailed 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 detailed 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.