Tax planning beyond 80C: Other sections that can maximise tax saving

Section 80C – One section, multiple eligible investments and expenses!

Section 80C allows you to save tax through eligible avenues like –

• 5-year fixed deposits

• Equity Linked Saving Schemes (ELSS)

• Public Provident Fund (PPF)

• Employees’ Provident Fund (EPF)

• Life insurance premium

• Home loan principal repayment, etc.

However, the maximum deduction allowed under the section is ₹ 1,50,000, which equals ₹ 45,000 in tax savings if you are in the 30% tax bracket (30% of ₹ 1.5 lakhs). But what if you exhaust the 80C limit? Can’t you save any more tax?

Actually, you can!

Chapter VI A of the Income Tax Act of 1961 lists various other sections that can help with tax planning. These sections also allow various deductions to lower your tax liability further. Let’s check out these sections and their respective tax benefits.

Lesser-known tax-saving sections of the Income Tax Act
 

• 80CCD (1B)
 

Section 80CCD(1B) allows an additional deduction for investments in the National Pension Scheme (NPS). Contributions up to ₹ 50,000 qualify for deduction under this section. This is over and above the deduction available under Section 80C.

Also read - New Tax Regime - Old vs New Tax Regime

• 80D

Section 80D is meant for health insurance premiums. The premiums that you pay for a health insurance policy qualify for deduction under Section 80D. The deduction limit depends on your age and for whom you bought the insurance policy. Have a look –

So, with health insurance premiums, you can claim a maximum deduction of up to ₹ 1,00,000 and save an additional tax of up to ₹ 30,000 if you are in the 30% tax bracket (30% of ₹ 1,00,000)

• 80DD
 

If you have a disabled dependent, you can claim a tax deduction under Section 80DD for looking after them. The limit of deduction allowed is ₹ 75,000 if the disability is between 40% and 80% and ₹ 1,25,000 if it is 80% and above.

• 80DDB
 

The Income Tax Act lists specified illnesses under Section 80DDB. These include cancer, AIDS, neurological illnesses like dementia, Parkinson’s disease, etc. If you suffer from any of these specified illnesses, you can claim a deduction under this section. The limit is up to ₹ 40,000 if you are below 60 and ₹ 1,00,000 if you are 60 years or above.

• 80E

Section 80E allows a deduction on the interest paid towards an education loan. If you have availed of a loan to fund the higher education of self or dependent child, the interest paid towards the loan would be allowed as a deduction from your taxable income.

There is no limit on the deduction allowed. The entire amount of interest paid qualifies for a deduction. The deduction is available for up to 8 years from the date you start loan repayment.

• 80G
 

Charity can be rewarding, and Section 80G proves that. The section allows deduction on the amount donated to approved charitable institutions and funds. 50% or 100% of the amount donated qualifies for a deduction, depending on the charitable institution that you choose.

Remember, donations by cash also qualify for a deduction under Section 80G. However, the limit is only up to ₹ 2,000. If you are donating more, the mode of donation should be a cheque, demand draft, or digital payment mode.

• 10(13A) & 80GG
 

Are you living in a rented house?

If you are, you are eligible to claim a deduction for House Rent Allowance (HRA). In the case of salaried employees, employers provide HRA as a part of an employee’s salary component. In such cases, the maximum HRA eligible for deduction is the lowest of the following u/s 10(13A) –

• Actual HRA received from the employer

• 40% of the basic salary (basic pay + dearness allowance) if you are living in a non-metro city else 50%

• 10% of the basic salary – actual rent paid

However, for self-employed individuals or if HRA is not a part of your salary component, HRA exemption can be claimed under Section 80GG. Under the section, the allowed exemption is the lowest of the following –

• 25% of your total income (excluding capital gains and deductions under 80C to 80U; also, income is before making a deduction under section 80GG)

• Actual rent paid – 10% of your total income

• ₹ 5,000 per month or ₹ 60,000 per year

• Section 24
 

A home loan allows tax benefits on both the principal and the interest repaid. The principal qualifies for a deduction under Section 80C. However, the interest paid is allowed as an exemption under Section 24(b).

You can claim a maximum exemption of ₹ 2,00,000 in a financial year on the home loan interest paid.

• 80TTA
 

The interest earned on your savings account qualifies for deduction under Section 80TTA. You can claim a maximum deduction of up to ₹ 10,000 in a financial year.

• 80TTB
 

Section 80TTB extends tax benefits to senior citizens. Interest earned from fixed deposits and savings accounts qualify for a deduction under this section subject to a maximum amount of ₹ 50,000.

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Your way to holistic tax planning

Look beyond 80C to save tax on your income. Utilise one or more of the aforementioned sections for tax planning and maximise tax saving. Move into your dream home or fund your child’s higher education and fulfil your goals along with the added tax advantage.

Also, make your investments tax-efficient too. Choose the right savings account, like the IDFC FIRST Bank Savings Account, and earn guaranteed interest, which is also tax-free. Or invest in the NPS scheme and build a retirement corpus while saving tax.

Be an informed taxpayer and save more with each return. Save, invest, and utilise eligible expenses for maximum tax saving. Happy tax planning!

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.