The tax system offers a lot of opportunities to the taxpayers to reduce their taxable income, but most of the taxpayers focus only on availing the deduction of ₹ 1.5 lakh available under Section 80C.
Less awareness could be the reason, but by knowing about all those tax-saving opportunities, every taxpayer can reduce more taxes they pay.
In this article, we are 5 ways other than section 80C by which taxpayers can save on income tax.
1. Invest in NPS under Section 80CCD (1B): If you are a taxpayer and looking for opportunities to save extra tax then you can invest up to ₹50,000 in NPS. This is in addition to the benefits they can claim contribution under section 80C. They also have the option of using NPS for the ₹1.5 lakh limit under Section 80C. This blend of opportunities will convert the total deduction taxpayer can claim with NPS up to ₹ 2 lakh.
2. Invest in Health Insurance Premiums under section 80DHealth insurance is important and the government also promotes self-financed health insurance, by providing tax incentives. Section 80D permits tax deduction from the total taxable income for the premiums payment of health insurance along with expenses transacted for health care.
However, the limitations for claiming tax deduction u/s 80D rely on who all are covered under the health insurance coverage and how old they all are. Therefore, according to the family status of the taxpayer, the limit can be ₹ 25,000, ₹ 50,000, ₹ 75,000, or ₹ 1 lakh.
3. Repayment of an education loan under Section 80ETaking education loan for higher studies is common these days. Students who have taken education loans for their education are provided tax benefit on repayment of interest part of the loan under section 80E. This benefit can be availed by the parent or the child (student), it just depends on who is repaying the education loan. This can be only availed for taking education loans from institutions and not from friends, family members, or relatives.
4. With interest part of the Home loan under Section 24Taxpayers with home loans can claim tax deduction u/s 24 of Income Tax on the interest portion of their home loan. The maximum deduction a homeowner can avail of on the payment of interest of a home loan taken for the self-occupied property is ₹ 2 lakh.
If the said property which is bought with a home loan is not self-occupied and rented or planned to be rented, then there is no maximum limit defined for a tax deduction. So, a taxpayer can avail of the tax deduction on the entire interest amount as per section 24
5. Tax savings on interest repayment for first time home loan borrowers under Section 80EEIf you are a taxpayer and first-time homeowner, that means you do not have any other house property on the date of sanction of loan from any financial institution, then you can avail of tax deduction of up to ₹ 50,000 under section 80EE. This amount exceeds the limit of ₹ 2 lakh for repayment of home loan interest under section 24 of the Income Tax Act. Eligibility to claim this deduction includes the value of the house is less than ₹ 50 lakh, and the loan amount should be ₹ 35 lakh or less.
A taxpayer should know all the opportunities that are provided by the government. However, choosing the way to save more taxes is important. These 5 ways are effective and authentic as well. So go through them and choose the most suitable one as per your condition.
Authored by CA Amit Gupta, MD, SAG Infotech