When it comes to saving taxes, most taxpayers are already aware of the common deductions available under Section 80C of the Income Tax Act, such as ELSS, PPF, NPS, Home Loan Interest, or HRA. But apart from these, there are several lesser-known tax saving options that can further maximize your savings by reducing your tax liability.
In this blog, we will discuss top tax saving options other than Section 80C that will help you to legally save more taxes.
Section 80GG
The first tax saving option is under Section 80GG. If you are a salaried individual staying on rent, and your salary component consists of HRA i.e., House Rent Allowance, you are eligible to claim deductions and save your taxes.
But, what about entrepreneurs, business owners, and freelancers?
Well, if you are paying rent, you can also benefit from the deductions available under Section 80GG. But you will have to take care of three components.
i) Annual rent paid – 10% of your total income
ii) Rupees 5,000 per month, which adds up to Rs. 60,000 for a year
iii) 25% of your total income
Let us understand this with an example. Assuming that Sumit is a freelancer having an annual income of Rs. 5,00,000. He pays a monthly rent of Rs. 10,000
Therefore, the annual rent = 10,000 x 12 = 1,20,00
According to the first component, Annual rent paid – 10% of the total income, we get,
1,20,000 – 50,000 = 70,000
Now, as per the second component, Rs. 5000 monthly, i.e., Rs. 60,000 yearly.
In the third component, 25% of the total income = 25% of 5,00,000 = 1,25,000.
So, when we compare all three components, Rs. 60,000 is the least. Hence, Sumit can claim Rs. 60,000 under Section 80GG and save on taxes.
Section 80D
The second tax saving option, Section 80D is related to the premium paid for health insurance.
If you have purchased health insurance coverage for yourself, your spouse, or your children, you can claim a deduction of up to Rs. 25,000. Moreover, if you have purchased health insurance for your parents who are above or at the age of 60 years, you get a deduction of Rs. 50,000. So, overall, you can claim a deduction of up to Rs. 75,000 under section 80 D.
However, another beneficial provision that many people are not familiar with in Section 80D, is related to preventive health check-ups. It means, if in a particular year, you have done a preventive health check-up, you can claim an additional deduction of Rs. 5,000.
Let’s say, Sumit has purchased health insurance coverage for himself and his wife. He is paying an annual premium of around Rs. 18,000. Now, since the deduction limit is Rs. 25,000 and the health insurance premium is just Rs. 18,000, Sumit can get an additional health check-up done of Rs. 5,000 for himself and his wife and subsequently claim an additional deduction of Rs. 5,000.
Section 80CCD(1B)
As we all know, under section 80CCD(1B), if you invest up to Rs. 1.5 lakhs in National Pension System, you are allowed to claim a deduction for it. But if you invest an additional Rs. 50,000 in NPS, under Section 80CCD(1B), you can also claim this additional deduction of Rs. 50,000.
However, it is important to note that you can only claim this deduction if you invest in a tier 1 account of NPS. If you invest in the tier 2 account of NPS, then you will not be able to enjoy this benefit.
This means if you invest Rs. 2 lakhs in a year, in an NPS, you will get a deduction of Rs. 1.5 lakhs under Section 80C and you will receive an additional deduction of Rs. 50,000 under Section 80CCD(1B)
Section 80E
Section 80E is related to interest paid on education loan. So, if you have taken an education loan for yourself, your spouse, or your children for pursuing higher education, you can claim a deduction on the interest component of your EMIs.
Another interesting thing about Section 80E is that there is no upper capping on whatever interest you are paying in a year for the repayment of your education loan. So, to claim deductions under section 80E, you need to keep a few things in mind, such as the loan taken should only be for higher education and you can claim it only for the interest component in the next 8 years.
Section 80G
Section 80G is related to the charity and donations you make to any charitable organizations, institutions, or government-approved funds. Basically, the objective of section 80G is to encourage people to donate money and at the same time claim tax deductions.
Some charitable organizations may help you claim up to 100% of the donated amount whereas some charitable organizations or funds can help you claim up to 50% of the donated amount.
So, while donating, you can check whether you are eligible to claim a 100% or 50% deduction based on the Section 80G certificate provided to you.
Conclusion:
These are the top 5 tax-saving tips that are not very well-known to taxpayers.
Tax saving is a crucial aspect of financial planning, and it is important to understand all the exemptions and deductions applicable to you. This way, you can make the right investments and legally avail maximum tax-saving benefits.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.