Income tax laws provide individuals with a bunch of tax saving options. Individuals invest in these options and provide proof of investments to their employers, which in turn helps lower tax deduction. In case the individual has not provided the proof to the employer, the same deduction can be claimed while filing the return.
Here are some of the popular tax saving options in India:
Section 80C: PPF, NPS, life insurance premiums etc.
Section 80C of the income tax law is the most popular option used for saving income taxes. Here, an individual or a Hindu Undivided Family (HUF) can claim a deduction up to Rs 1.5 lakh from their gross total income. All the investments made under this section is aimed at saving taxes and earning a return of those investments. You can invest in tax saving options under 80C like PPF, NPS, 5-year term deposits, life insurance premiums, ELSS funds, children’s tuition fees and housing loan principal repaid among others.
Section 80D: Medical insurance premium
An individual can claim a deduction of the health insurance premium paid for self, family and dependent parents. The deduction limit is Rs 25,000 annually for the premium paid for self or family. In case the premium is paid for senior citizen parents, then an individual can claim up to Rs 50,000 in a financial year. A deduction of Rs 5,000 on the health checkups can be claimed. However, this is included in the overall limit mentioned above.
Section 24: Interest on home loan
Another key to save taxes is paying interest on housing loan. Individuals, who are homeowners, can claim a deduction up to Rs 2 lakh for interest paid on home loan for a self-occupied property. For a let out property, one can claim entire interest paid on home loan in a financial year. However, from FY 2017-18 onwards, loss from house property that can be set off against other sources of income is restricted to Rs 2 lakh. Taxpayers can also claim a deduction for principal repayment of a housing loan under section 80C, where the overall limit is Rs 1.5 lakh.
Section 80E: Deduction for loan on higher education
The act provides a deduction for interest paid on higher education loan in a financial year. The loan should have been taken from a bank or a financial instruction for pursuing higher studies in India or abroad. The individual can claim a deduction under section 80E if he himself pursues higher studies or he is sponsoring his spouse’s or child’s higher education.
Section 80G: Deduction on donation
An individual making donations to charitable institutions can claim a deduction under section 80G of the amount paid as donation. The donation must be paid through channels other than cash. The maximum cash donation allowed is Rs 2,000. Also, the eligible deduction amount depends on the organisation receiving the donation, in some case deduction is 50 percent or could be 100 percent of the amount donated, with or without certain restrictions.
Section 80TTA: Deduction on savings account interest
Income tax law offers a deduction of Rs 10,000 on income earned from savings account interest to individuals and HUFs. Senior citizens can claim a deduction of Rs 40,000 under section 80TTB, however, this deduction is for interest from deposit accounts only.
Section 80EE: Additional deduction for interest on housing loan
Homeowners are allowed to claim a deduction of Rs 50,000 in addition to deduction under section 24, for interest payment on a housing loan during a financial year. Provided, the loan must exceed Rs 35 lakh and value of the property should not be more than Rs 50 lakh. The loan should have been taken in the FY 2016-17. An individual will be able to claim this deduction only if he does not have any other property registered under his name as on the date of sanction of the loan.