Tax-time hacks: Unlock the benefits of deductions beyond 80C to save more money.
Many taxpayers solely rely on Section 80C of the Income Tax Act for tax-saving instruments. However, prudent tax planning entails understanding and using the various other sections of the tax laws that can help minimise tax outgo and maximise savings. Let’s take a look at some lesser-known but potentially significant tax-saving provisions.
Home loan (Section 24): Owning a home comes with its share of tax benefits. Section 24 allows you to deduct interest paid on your home loan up to a certain limit. Section 24(b) allows a deduction on home loan interest up to Rs 2 lakh.
Health insurance (Section 80D): Your health insurance premiums are not just an expense; they can be a tax saver. According to Section 80D, deductions can be claimed for premiums paid for oneself, one’s spouse, and dependent parents, subject to a specified limit.This offers a double benefit: you get health coverage and reduce your tax burden.
Taxpayers are entitled to claim up to Rs 25,000 for insurance covering themselves, their spouses, and their dependent children. An additional deduction of Rs 25,000 can be claimed for the insurance of parents (this increases to Rs 50,000 if parents are senior citizens).
Invest in your retirement (Section 80CCD): The National Pension Scheme (NPS) is an excellent way to plan for your golden years. Section 80CCD(1B) offers an additional deduction over and above the 80C limit for contributions made to NPS. This is a great way to save for retirement while reducing your current tax outgo. It provides an additional deduction of Rs 50,000 for contributions made towards the scheme, above the Rs 1.5 lakh limit under Section 80C.
Charity benefits (Section 80G): Contributing to charitable institutions or notified funds allows for deductions under Section 80G. This is a win-win situation: You support a worthy cause and save on taxes.
It offers deductions for donations made to certain specified funds, charitable institutions, etc. Notably, the deductions under this section can range from 50% to 100% of the donation made, subject to certain prescribed limits.
Others: Several other sections offer deductions for specific expenses, like interest on education loans, donations for specific causes, and even rent paid (if you don’t avail yourself of the House Rent Allowance).
Besides, section 10(14) covers allowances such as travel, uniform, or daily allowances received by an employee. These are exempted from tax to the extent of actual expenses incurred, thereby reducing taxable income.
When leveraged judiciously, all these income tax sections can help you optimise your tax planning. However, your goal should not just be about saving tax but also about creating wealth for the future.