How to save tax | Income Tax Saving Options

Everyone wants to save tax in India. There are certain tax exemptions which you can claim at the time of filing income tax returns. You might know some income tax saving options but still, there is scope to find some new methods to save tax this year.

You can save more taxes by planning your taxes properly and planning taxes is not a difficult task. In this post, let’s take a look at how to save tax | income tax saving methods.

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How to save tax?

There are various expenses and investments that you do which can save you a lot of taxes for you. Below is the list of the expenses and deductions which you can claim under various sections of Income Tax Act while filing income tax returns.

Income Tax Saving Options under Section 80C

EPF (Employees Provident Fund)

EPF (Employee Provident Fund) is a popular investment scheme with the salaried class in India.

PPF (Public Provident Fund)

Public Provident Fund (PPF) is one of the best options if you are looking for a long-term investment opportunity. PPF scheme is backed by government of India.

NSC (National Savings Certificate)

NSC (National Savings Certificate) is an Indian Government saving bond. The NSC scheme is used for small savings and comes with a lock-in period of 5 years.

ELSS (Equity Linked Savings Scheme)

ELSS is a diversified equity mutual fund and popularly known as tax saving mutual fund. The ELSS fund comes with a lock-in period of three years.

NPS (National Pension Scheme)

The National Pension Scheme is popularly known as NPS. The NPS scheme is a voluntary, defined contribution based retirement savings scheme launched by Government of India.

ULIP (Unit Linked Insurance Plan)

Unit Linked Insurance Plan is a product offered by insurance companies. ULIP gives you dual benefit of life insurance and equity investment.

Sukanya Samriddhi Account

Sukanya Samriddhi Account is a saving scheme backed by Government of India and targeted at the parents of girl children. It encourages parents to build a fund for the higher education and marriage for their girl child.

Tax Saving Bank Fixed Deposits (FD)

Bank fixed deposits will give you a fixed return but comes with a lock-in period of 5 years.

Post Office Time Deposit (5 Years)

Post Office Time Deposits are available for different time periods but the investment made towards 5 Years Time Deposit is eligible for tax benefits.

Life Insurance Premium

The life insurance premium paid for self, spouse, and children is eligible for tax exemption under this section.

Senior Citizens Savings Scheme (SCSS)

This saving scheme is for senior citizens. Tenure of this scheme is 5 years. Investment of up to Rs 1.5 lakh under this scheme is eligible for tax deduction.

Notified Annuity Plan

Amount paid towards notified annuity plan of LIC or other insurance company.

Children’s Tuition Fees

You can compensate the expenses you incur on your children’s school or college tuition fees by reducing your taxes. This deduction can be claimed only for two children.

Repayment of Home Loan

You can claim tax benefits on the repayment of the principal amount of a home loan.

Income Tax Saving under Section 80CCC

The premium for Annuity Plan

Any amount paid or deposited to certain pension funds of LIC or any other insurer for receiving a pension (Subject to certain conditions).

Tax Saving under Section 80CCC

National Pension Scheme (NPS)

An additional amount that can be contributed in NPS for tax benefits under section 80CCD is Rs. 50,000. National Pension Scheme is a popular retirement scheme. You can start contributing in NPS with Rs. 500 to save tax.

Income Tax Saving under Section 80D

Health Insurance Premium

You can claim a maximum deduction of Rs. 25000 for the premium paid for self, spouse, and children. An additional deduction of Rs 25000 is also allowed for the premium paid for parents.

This limit is Rs. 30000 for senior citizens. You can also claim a deduction of Rs 5000 for preventive health checkup within the limit of Rs. 25000/30000.

Income Tax Saving under Section 80DD

Expenditure on the health of disabled person

You can claim a maximum deduction of Rs. 75,000 (Rs. 1,25,000 in case of severe disability) if you incurred the expenditure for the medical treatment, training, and rehabilitation for disabled relatives.

Tax Saving under Section 80DDB

Medical Expenses for specified diseases & ailments

This deduction available for the expenses actually paid for medical treatment of specified diseases. The ailments subject to certain conditions.

Income Tax Saving under Section 80E

Payment of Interest on Education Loan

Amount paid as interest on loan taken for pursuing higher education is eligible for deduction. There is no maximum limit on the amount and the maximum period is 8 years.

Income Tax Saving under Section 24

Interest on Loan for a Self-Occupied House Property

The tax benefit on home loan interest allowed under Section 24 for a self-occupied house property. The maximum limit is Rs. 2 lakhs.

Tax Saving under Section 80EE

Home Loan Interest Payment

First time home buyers can claim an additional tax benefit of Rs. 50,000 on home loan interest under this section (subject to certain condition). A maximum deduction of Rs.50,000 is eligible.

Income Tax Saving under Section 80G

Donations

Donations to certain approved funds, trusts, charitable institutions, temples (for repair) are eligible under this section. The donations eligible for deduction up to either 100% or 50% as provided in section 80G.

Tax Saving under Section 80GGC

Donations to political parties

Donations made to political parties are eligible as deductions under this section. Note that such donations should be made using any mode of payment other than cash.

Income Tax Saving under Section 80GG

Rent paid for accommodation

This section applies to those who do not own a residence and do not receive house rent allowance (HRA) as part of their salary. This deduction available for house rent paid and will be the least of the following:

1. Rs 5,000/- month

2. Rent paid minus 10% of the total income

3. 25% of the total income

Income Tax Saving under Section 80TTA

Interest on Savings Account

The interest earned on deposits in a saving account up to Rs. 10,000 is eligible as a deduction under this section. This deduction is applicable to an individual as well as to a HUF.

Note: This post was originally published on June 24, 2018 and has been completely updated for accuracy and comprehensiveness.

Start using these income tax saving options to save tax this year.