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A Quick Look at Some Tax Saving Hacks – 80C, 80D, and more

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Published on February 18, 2022. EST READ TIME: 3 minutes

Whether you have been paying taxes for a while or are about to do so for the first time, it is natural to wonder how you can save some money in the process. While as a responsible citizen,you should pay taxes on time and there are many benefits of filing an Income Tax Return (ITR), if you have the scope to save money, why wouldn’t you?Well, here’s some good news for you. You can reduce your taxable income by making intelligent investments (including health insurance) that fall under the Income Tax Act.

Let’s explore some of the sections that will be more useful at this phase of your life

Section 80C

This Section provides tax deduction up to INR 1.5 lakhs in a fiscal year on investments made in certain saving schemes and expenses on specified deductibles in the same year. This benefit can be availed only by individuals and Hindu Undivided Families (HUFs). For instance, if your annual taxable income is INR 10 lakhs and if you make an investment of INR 1 lakh from this income, then your taxable income will be reduced to INR 9 lakhs. Some of the investment instrumentsthat are eligible for tax deduction include mutual funds, PPF (Public Provident Fund), National Savings Certificate, EPF (Employees’ Provident Fund), ELSS (Equity-linked savings scheme), Sukanya Samriddhi Yojana, 5-year fixed deposits in a bank and/or post office, life insurance policies, Senior Citizen Savings Scheme, etc. Since each instrument is different from the other in terms of rate of return, investment limit, liquidity needs, etc., you can select the appropriate tax-saving investment tool.

Expenditures that are allowed for tax benefit are school fees of your children (up to 2 children), repaymentof home loan principal.

You can claim deduction under this section only if you opt for the old tax regime. If you opt for the new tax regime, you cannot claim any benefit under Section 80C.

Section 80D

Under Section 80D, an individual or HUF taxpayer can claim tax rebate for payment made towards health insurance premiums. The health insurance can be bought for self, spouse, dependent children and parents. If you pay health insurance premium for self, spouse and dependent children, you are eligible for a tax deduction of INR 25,000 per annum. If you buy insurance for your parents, you can claim an additional deduction of INR 25,000 if they are below 60 years of age. If your parents are senior citizens (above 60 years), the tax benefit is INR 50,000 per year. If you are also a senior citizen, the maximum tax deduction that can be availed is INR 1 lakh.

For example: 45-year-old Sourav has bought a medical insurance for himself and his 70-year-old father. He pays premiums of INR 30,000 and 35,000 respectively. Under Sec 80D, Sourav can claim up to INR 25,000 for his cover and up to INR 50,000 for his senior citizen father. Thus, he gets a total tax deduction of INR 60,000 (INR 25,000+INR 35,000) for the year. In addition to this, you can avail tax benefit of INR 5,000 for payment made towards preventive health check-ups. This deduction will be within the overall limit of INR 25,000/INR 50,000,based on the case.

Section 80CCD (1B)

If you invest in the National Pension Scheme (NPS) of the Government of India, you can claim a maximum deduction of INR 50,000 under this section. This deduction is over and above the tax deduction of INR 1.5 lakh under section 80C. This is not only tax-saving in nature, but also creates a retirement corpus.

Section 80TTA/TTB

Section 80TTA provides tax deduction up to INR 10,000 on interest received on your savings account held in a bank, post office or co-operative bank. You can claim deduction on any number of accounts, but the limit isINR 10,000. This section is applicable only to individuals and HUFs and not senior citizens. It is also applicable only for savings accounts and not on interest earned on fixed deposits, recurring deposits or any other deposits.

Section 80TTB is meant only for senior citizens. Any taxpayer above the age of 60 can claim a maximum tax deduction of INR 50,000 on interest earned on savings or fixed deposit accounts held in banks, co-operative banks or post office.

Section 80GG

If you are self-employed or a salaried employee and do not avail HRA (House Rent Allowance) but stay in a rented house, you can avail tax benefit under this Section. There are 3 categories for claiming and the lowest of these 3 will be considered as the deduction amount;INR5,000 per month or 25% of the total income in a year (after deduction under Section 80C to 80U) or actual rent minus 10% of the taxpayer’s total income.

Other sections that provide deductions

Apart from the above-mentioned sections, you can also get tax rebate under Section 24 on home loan interest, Section 80E for interest paid on education loan, Section 80G for donations or contributions towards institutions, etc.

Conclusion

There are multiple ways for you to save on tax. We talked about some of the popular sections under which you can claim deductions,but you may be eligible for more benefits depending upon your age, profession, etc. You can check out these benefits online or consult a tax advisor.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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