Till the time most of us don’t start earning, we keep wondering why all the fuss about tax saving. But the moment we get our first salary and see the amount of tax being cut, we realise the importance of effective tax planning.
Yet, most of us fail to take advantage of all the tax saving avenues available of us. Mostly we stop after claiming deduction under Section 80C, primarily due to lack of awareness about other options.
In this blog, we will tell you about 5 ways through which you can save tax beyond the Rs. 1.5 lakh allowed under section 80C
1. Additional tax saving for NPS investments under Section 80CCD (1B)
Every year, you can claim a deduction upto Rs 1.5 lakh under Section 80C by contributing to the National Pension System or NPS. Besides this, you can claim an additional deduction under Section 80CCD (1B) by contributing another Rs 50,000. This means, if you fall under the 30 percent tax bracket, you can reduce your tax amount by Rs 15,600 by investing in NPS. The 4 percent educational cess is also included within this.
2. Tax Saving on Health Insurance under Section 80D
Today, health insurance is a necessity rather than an option. If you do not have a health insurance policy, then a medical emergency can adversely affect your financial health. So, health insurance policies come with certain tax benefits so that more and more people buy it.
You can claim tax benefits under Section 80D for the premium amount paid for your health cover. And the benefits can be claimed for – standard health insurance policy, health insurance riders and also top up health cover. You can also claim tax deduction for preventive health check ups, provided it is within the limits of your health cover.
Under Section 80D, the deduction limit depends on the age of the insured and family members covered under the policy. As per the taxpayer’s family situation, deduction limit can be Rs 25,000, Rs 50,000, Rs 75,000 or Rs 1,00,000.
| Policy Type | Tax Deduction Limit |
|---|---|
| Covering individual, husband/wife and children | ₹ 25,000 |
| Covering individual, husband/wife and children and if any one is a senior citizen | ₹ 50,000 |
| Covering Parents (not senior citizens) | ₹ 25,000 |
| Covering Parents (senior citizens) | ₹ 50,000 |
If the health policy covers your immediate family and not parents, then you can claim up to Rs 25,000 on the premium paid. If the policy covers a person who is over the age of 60, then the limit you can claim is Rs 50,000. Besides, if you have taken any policy for your parents, then the premium for non-senior citizens is Rs 25,000. And for senior citizens, it’s Rs 50000. This is over and above your family cover limit.
Let’s look at an example. Suppose, 35-year-old working professional Anil has bought a health insurance policy that covers him, his wife and child. Under Section 80 D, he can claim upto Rs 25,0000 for this policy in a financial year. A preventive health check up is also included in this policy. Every year, he pays Rs 18,000 for this policy, and another Rs 4,000 for the preventive health check up. Under Section 80D, he can claim a deduction of Rs 22,000.
Now, he has bought another health policy for his parents, who are senior citizens. For this policy, he can claim deductions upto Rs 50,000. In total, he would be able to claim deduction upto Rs 75,000 for two policies.
3. Tax Savings on Disabled Dependent under Section 80DD
If a taxpayer is looking after a disabled dependent, then he can claim tax deductions under Section 80DD. This deduction is offered as a help towards the family members of the disabled. Under this section, a disable dependent can be – wife, children, parents and siblings. In Hindu Undivided Family (HUF), it can be any member of the family.
To claim benefits under this section, it is necessary to ensure that the disabled dependent has not claimed deduction under section 80U.
Disabilities covered under the section are –
- Blindness
- Low vision
- Loco-motor disability
- Hearing impairment
- Mental retardation
- Mental illness
- Autism
- Cerebral palsy
You can claim deductions on
- Expenses on disabled person’s treatment, nursing, training and rehabilitation.
- For premium paid on policies for these specific conditions
However, the amount of deduction is dependent on the seriousness of the condition. If the disability is upto 40 percent, then the taxpayer can claim deductions up to Rs 75,000. If the disabled person is at least 80 percent disabled, then the taxpayer can claim a deduction up to Rs 1,25,000
4. Tax Saving on Education Loan interest under Section 80E
Under Section 80E, tax benefits can be claimed on the interest component of an education loan. And, there is no defined limit for this. This deduction can be claimed by the student or the parents, whoever is making the repayment. This benefit, however, can be availed from the first year of the repayment till the eighth year or till the time repayment is complete, whichever is earlier.
For example, let’s suppose, you complete the repayment process within six years, then you can avail the benefit for six years. On the other hand, you can continue to repay the education loan even after the eight year limit, but in that case, you cannot avail this tax benefit.
5. Tax Saving on Saving Bank Interest under 80TTA and 80TTTB
We all keep money in banks and earn an interest on that. Every individual and HUF can claim a tax deduction on this interest paid. Tax payers, who are not senior citizens, can claim deductions under Section 80TTA and senior citizens can claim taxes under Section 80TTB.
However, tax deduction cannot be claimed on the interest earned on FDs, RDs or Term Deposits
Section 80TTA:
The maximum deduction limit under this section is Rs 10,000. This means, you can claim deduction on the interest earned up to Rs 10,0000. If you have several savings accounts, even in that case, interest earned from all the accounts will be clubbed together. The excess amount will be considered as income from other sources and that money is taxable.
For example, Anant has three savings accounts. From these accounts, he earned an interest amount of Rs 6,000, Rs 8,000 and Rs 12,000. The total interest income is Rs 26,000. But, under Section 80TTA, he can claim a deduction of Rs 10,000. The rest Rs 16,000 will be considered as income from other sources.
Section 80TTTB:
This section was introduced on April 1, 2018 as a benefit to be availed by the senior citizens who use interest earned from saving bank accounts and deposits as their source of income. Under this section, senior citizens can claim tax deduction up to Rs 50,000.
Bottomline:
As you can see, if you use all the tax saving options mentioned above, you can save quite a bit of taxes beyond Section 80C. However, please remember, tax benefit shouldn’t be the primary reason for you to go for the investment products or insurance mentioned above.
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