by
iciclombard 01
| Oct 25, 2023
Indian income tax regulations provide many opportunities to lessen your tax burden. However, most taxpayers are only aware of the ₹1.5 lakh deduction under Section 80C of the Income Tax Act.
By knowing about many other tax-saving possibilities, taxpayers can lessen the total tax payable during a financial year. In this article, we are listing five approaches on how to save tax under different sections other than 80C. We hope you find a useful resource in the list and use it to your advantage. Do remember that this is not an exhaustive list; you can consult a professional, like an income tax lawyer or a chartered accountant, to know about other options applicable to your particular situation.
Tax saving options other than 80C
Apart from Section 80C, taxpayers can claim deductions and exemptions under different sections of the Income Tax Act. Here are ten ways to save tax beyond 80C:
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Section 80D: Health insurance
Under Section 80D, you can claim tax exemption on the premium paid toward a health insurance policy. If you’re paying the premium for yourself or your dependents, the eligible amount for exemption is ₹25000. If you’re paying the premium for parents above 60 years of age, the eligible exemption goes up to ₹50000. In case you and your parents both are above 60 years of age, the upper limit on exemption for premium paid goes to 1 lakh (₹50000 + ₹50000).
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Section 80CCD (1B): National Pension Scheme (NPS)
Taxpayers can save by investing up to ₹50,000 in NPS under subsection 80CCD (1B). This is over and above the ₹1.5 lakh ceiling limit of Section 80C. So in total you can claim deduction for investments in NPS of up to ₹2 lakh, considering both Sec 80C and subsection 80CCD (1B).
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Section 24(b): Tax savings on the interest component of a home loan
Homeowners who have a loan can claim a tax deduction for the interest component of their mortgage under Section 24(b) of the Income Tax Act.
The highest tax deduction available to a taxpayer in this country for interest payments on a house loan for a self-occupied property is ₹2 lakh.
If the property for which the house loan was obtained is not self-occupied and is rented or presumed to be rented, there is no maximum limit for a tax deduction, and as a taxpayer, you can deduct the whole interest amount under Section 24.
However, the amount of tax deduction possible under Section 24 gets restricted to ₹2 lakh in circumstances when the borrower (i.e., homeowner) is unable to occupy the property owing to work, business, or profession carried on in another location, compelling him/her to stay in another location.
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Section 80E: Tax savings on education loan repayment
Borrowing to fund higher education is widespread these days. Students who take out an education loan to further their studies are eligible for a tax exemption on the interest component of the loan under Section 80E.
This tax advantage can be claimed by either the parent or the kid (student), depending on who is paying off the loan.
This tax advantage is accessible only when borrowing from financial institutions, not from family members, friends or relatives.
Taxpayers can claim the deduction from the year they begin repaying the interest on the education loan and continuing for the next seven fiscal years, or until the interest is paid in full, whichever comes first. The deduction for interest repayment has no upper limit.
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Section 80EE: Tax savings on home loan interest repayment for first-time home buyers
First-time home buyers (those who don’t own any other house property as on the date of loan sanction from a financial institution) can claim a tax deduction of up to ₹50,000 under Section 80EE.
This amount exceeds the ₹2 lakh limit set by Section 24 of the Income Tax Act for repayment of house loan interest.
To be eligible for this deduction, the house’s worth must be less than ₹50 lakh, and the loan must be for less than ₹35 lakh.
This section was originally presented in 2013-14 and was only accessible for two fiscal years. But this provision has been restored since 2016-17, and the tax advantage is available until the loan is returned, subject to a ₹50,000 yearly ceiling.
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Section 80DDB: Treatment of specified diseases
If you are a taxpayer and have been diagnosed with a life-threatening disease, such as cancer, any neurological disease (like dementia, motor neuron disease, Parkinson’s disease), or AIDS, you may be eligible for a tax deduction under Section 80DDB.
Individuals or HUF can claim a deduction under Section 80DDB for the medical care of a dependent suffering from a specified disease.
The deduction is limited to ₹40,000 or the amount paid (whichever is less). This maximum limit gets raised to ₹1 lakh in the case of senior citizens (aged 60 years and above) or dependents.
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House Rent Allowance (HRA) Exemption
If you live in a rented house, you can claim HRA exemption under Section 10(13A), reducing your taxable income. The deduction amount depends on:
- Actual rent paid minus 10% of basic salary.
- For metro cities- half of the total salary and for non-metro cities- 40% of the salary
- Actual HRA received.
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Savings Account Interest (Section 80TTA & 80TTB)
Under Section 80TTA, savings account interest up to ₹10,000 is tax-exempt for individuals below 60 years. Under Section 80TTB, senior citizens can claim an exemption of up to ₹50,000 on interest earned from savings and fixed deposits.
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Leave Travel Allowance (LTA) Exemption
Employees can claim LTA tax exemption for domestic travel expenses under Section 10(5). This can be availed twice in a block of four years.
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Donations to Charitable Organisations (Section 80G)
Donations made to approved charitable institutions or relief funds are eligible for tax deductions under Section 80G. The total deduction can be anywhere between 50% to 100%, finalised on the basis of the organisation to which the donation is being made.
How to save income tax in the new and old tax regime?
The Indian tax system offers two tax regimes—the old tax regime with deductions and exemptions and the new tax regime with lower tax rates but fewer exemptions. Here’s how tax-saving differs under both:
Old Tax Regime (Best for Maximising Deductions)
- Allows claims under Section 80C, 80D, 24(b), 80E, 80G, etc.
- Suitable for individuals who have significant investments and expenses.
- Beneficial for those with a health insurance plan covering their family and parents.
New Tax Regime (Best for Lower Tax Rates)
- Deductions such as 80C and 80D are not allowed.
- Lower tax rates across income slabs.
- Suitable for individuals with minimal investments and expenses.
Conclusion
Taxpayers should be aware of tax saving methods other than Section 80C so that they can get exemption on different investments and expenses made during the financial year. There are multiple ways to save tax , including deductions on health insurance, home loan interest, NPS and education loans. While choosing between the old and new tax regimes, evaluate your financial situation and select the one that maximises savings. Being aware of perks such as health insurance tax benefits can help you reduce your tax burden effectively while ensuring financial security.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is not intended as a substitute for professional advice, diagnosis or treatment. Please consult a certified medical and/or nutrition professional for any questions. Relying on any information provided in this blog is solely at your own risk, and ICICI Lombard is not responsible for any effects or consequences resulting from the use of the information shared.