Strategic Tax Planning: Explore Your Tax Saving Options
The government of India offers many tax-saving options to Indian taxpayers and taxpayers across the country must plan their investments in such a way that they can save maximum tax each financial year. In this article, we look at some of the tax-saving options.
Strategic Tax Planning: Explore Your Tax-Saving Options
1. Section 80C of the Income Tax Act
Individuals who have availed of a home loan can avail tax benefits under Section 80C of the Income Tax Act on payments they have made towards the repayment of the principal component of their home loan. Other than this, investments made towards Provident funds, insurance premiums, equity-linked saving schemes, etc., are also deductible under Section 80C of the Income Tax Act. The maximum tax benefit that one can deduct under this section of the ITA is Rs.1.5 Lakh.
2. Section 24b of the Income Tax Act
Other than claiming tax benefits under Section 80C on the principal component of one’s home loan, those repaying a home loan can also claim tax benefits on payments made towards the repayment of the interest component of their home loan. The maximum tax benefit that one can claim under Section 24b of the Income Tax Act is Rs.2 Lakh.
3. Section 80D of the Income Tax Act
Under Section 80D of the Income Tax Act, taxpayers can claim tax benefits on payments made towards health insurance premiums. One can claim up to Rs.50000 under this section if one is paying for medical insurance premiums that cover oneself, children and parents. Individuals above 60 years of age can claim tax benefits up to Rs.1 Lakh under this section if they are paying premiums for both themselves and their parents.
4. Section 80E of the Income Tax Act
Individual taxpayers can claim tax benefits on payments towards the repayment of one’s education loan. There is no limit on the amount that one can claim under this Section of the Income Tax Act.
5. Section 80EE and Section 80EEA of the Income Tax Act
First-time home buyers who have invested in affordable housing and who have availed of a home loan to pay for their home can claim tax benefits under Section 80EE and Section 80EEA of the Income Tax Act. The maximum limit permissible under Section 80EE of the Income Tax Act is Rs.50,000 and the maximum limit permissible under Section 80EEA is Rs.1.5 Lakh. However, one can claim tax benefits under these sections only if one meets all the mentioned criteria.
Over and above the tax deduction avenues mentioned above, taxpayers can claim tax benefits under various other sections of the Income Tax Act. Under Section 80CCD, one can claim tax benefits up to Rs.50,000 on contributions made towards the National Pension Scheme. Under Section 80DDB, one can claim tax benefits up to Rs.40000 (Rs.1 Lakh in the case of senior citizens), on payments made towards the treatment of certain specific illnesses, and under Section 80DD, one can claim tax benefits on expenses incurred towards the treatment of handicapped dependents. Section 80G deals with tax deductions on donations made to approved charitable institutions and section 80GG deals with payments made towards rent by employees who do not have any HRA. In short, the government of India offers taxpayers many different tax-saving avenues and taxpayers can make use of these tax-saving avenues to reduce their tax liability by a considerable margin.
