Most taxpayers know about claiming deduction under Section 80C of the Income Tax Act 1961 up to Rs. 1.5 lakh. However, there are more tax-saving opportunities beyond the Section 80C route that can further help you reduce your tax liability. In this article, let us explore these tax-saving options to make you a smart tax saver.
How to Save Tax Outside Section 80C?
|Section 80D||Mediclaim Premium|
|Section 80E||Interest on Education Loan|
|Section 80G||Donations to Charitable Institutions|
|Section 80GGC||Donations to Political Parties|
|Section 80EE||Interest Repayment on House Loan|
|Section 80CCD1(B)||National Pension Scheme (NPS)|
In this article
- 1. Mediclaim Premium Paid Under Section 80D
- 3. Donations to Charitable Institutions Under Section 80G
- 4. Donations to Political Parties under Section 80GGC
- 5. Interest Repayment on House Loan under Section 80EE
- 6. Contribution Made to NPS
- Additional Things To Keep In Mind Before Opting For a Tax-saving Option
- Key Takeaways
- Frequently Asked Questions
1. Mediclaim Premium Paid Under Section 80D
- Section 80D allows taxpayers to claim deductions for healthcare expenses and health insurance premiums. You can purchase a health insurance plan for yourself, your dependent children, spouse and parents.
- The maximum deduction you can claim when you, your spouse and your dependent children are all below 60 years is up to Rs. 25,000. However, if the eldest member is over 60 years, this limit gets increased to up to Rs. 50,000 for self, spouse and dependent children.
- You can claim an additional deduction for the premium paid for parents of up to Rs. 25,000 if they are below 60 years of age. If the parents are over 60 years old, the deduction increases to Rs. 50,000.
- Additionally, a rebate of Rs. 5,000 is allowed for expenses on preventive health check-ups
2. Interest on Education Loan under Section 80E
Section 80E allows you to claim a deduction for the interest on an education loan for self, children, spouse, or any student to whom you are a legal guardian. The deduction can only be claimed when the education loan is taken for higher studies from approved financial institutions. There is no upper limit to the amount you can claim under this section.
However, the deduction can be claimed for up to 8 years. It starts from the year you begin repaying the interest.
3. Donations to Charitable Institutions Under Section 80G
Section 80G allows for a deduction for donations made by a taxpayer to an approved charitable institution. You should preferably make the donations by cheque as donations made above Rs. 2,000 through cash are not qualified as deductions. You can claim deductions of up to 50% or 100% of the donation amount, depending on the charitable institution you contribute towards. In some cases, the donation amount is restricted to a maximum of 10% of the adjusted GTI (Gross Total Income).
For example, the National Defence Fund qualifies for a 100% deduction. Jawaharlal Nehru Memorial Fund qualifies for a 50% deduction. Donations to any approved local institution or authority to be utilised to promote family planning qualify for 100% deduction, subject to 10% of the adjusted GTI (see FAQ for more).
4. Donations to Political Parties under Section 80GGC
Any donations towards political parties are tax-deductible provided they are made through a mode other than cash. The political party to which contributions are made should be registered under Section 29A of the Representation of People Act (RPA) 1951. The contributions do not have any upper limit.
5. Interest Repayment on House Loan under Section 80EE
If you are a first-time homebuyer, you can claim an additional deduction of up to Rs. 50,000 under Section 80EE towards repayment of home loan interest. This means the homeowner must not have any other property belonging in their name. This deduction is available in addition to the deduction available under Section 24.
The eligibility criteria to avail of this deduction are that your home loan should be Rs. 35 lakhs or less, and the value of the property should be not more than Rs. 50 lakhs.
6. Contribution Made to NPS
Section 80CCE of the income tax act mentions the deduction available under sections 80C and 80 CCD(1). Investments made under section 80C basket (EPF, PPF contributions etc.) and section 80CCD (1) (NPS contributions – directly or via employer) in a single financial year cumulatively cannot exceed Rs 1.5 lakh.
However, there is an extra deduction available for NPS contributions under section 80CCD(1B). The income-tax act allows an additional deduction of Rs 50,000 under this section for contributions made to the NPS. This is over and above the Rs 1.5 lakh available under Section 80CCE.
7. Tax Saving Options for Salaried 2020-2021 In A Nutshell
|Section 80D||Mediclaim Premiums||From Rs. 25,000 to Rs. 1 lakh (depending on the family situation)|
|Section 80E||Interest on Education Loan up to 8 years||No upper limit|
|Section 80G||Donations to Charitable Institutions||Based on the charity, 50%, 100% and maximum restriction up to 10% of adjusted GTI|
|Section 80GGC||Donations to Political Parties||No upper limit|
|Section 80EE||Interest Repayment on House Loan||Up to Rs. 50,000|
|Section 80 CCD (1B)||NPS||Up to Rs 50,000|
Additional Things To Keep In Mind Before Opting For a Tax-saving Option
Before you finalize any tax-saving option as part of your financial planning, remember to align it with your risk appetite. Know the lock-in periods, liquidity, safety, returns and taxability of the instrument before you invest. For example, if you buy an endowment plan but don’t continue after a year, it may result in a major loss if you stop it before the mandatory period.
Tax planning is a necessary requirement for a stable financial life. Understanding the various tax deductions available to you can help you considerably to reduce your tax liability. If you exhaust your deduction limit under Section 80C, these tax-saving options can further help you to save on income tax and manage your finances well.
Read More on Groww: Section 80 (C)
Frequently Asked Questions
1. Who can claim deduction under Section 80D?
Every individual, including non-resident individuals and HUF, can claim a deduction under Section 80D.
2. Can I claim a deduction for the principal amount too under Section 80E?
No, deduction under Section 80E is only for the interest portion of repayment of education loan.
3. What if I make donations to multiple political parties under Section 80GGC?
You can claim a 100% deduction under Section 80GGC for donations made to multiple political parties.
4. Can I claim tax exemption under Section 80EE for my second house?
No, the benefit under Section 80EE is available only on the first house.
5. How can I calculate ‘Adjusted gross total income’ for Section 80G?
Adjusted gross total income means the total of income under all heads minus:
- Deduction under Section 80C to Section 80U (excluding Section 80G)
- Incomes under Section 115A, 115AB, 115AC or 115AD
- Exempt income
- Long-term capital gains
- Short-term capital gains