Below is a list of some commonly used tax-saving options that can reduce your taxable income:
S. No.
| Section
| Nature of investment
| Exemption limit
|
1.
| 80C
| Amount invested in tax-saver fixed deposits, ELSS, NPS, etc.
| Rs. 1,50,000
|
2.
| 80CCD
| Contribution to NPS
| Rs. 50,000
|
3.
| 80D
| Premium paid for medical insurance (either for self or parents)
| Rs. 25,000/ 50,000
|
4.
| 24
| Interest on home loan
| Rs. 2,00,000
|
5.
| 80E
| Interest on education loan
| Full amount
|
1. Section 80C
Section 80C applies to individuals and Hindu Undivided Families (HUFs). Under this section, they can claim deductions of up to Rs. 1.5 lakh in a financial year. To do so, it provides various investment options as follows:
Investment
| Returns
| Lock-in period
|
Unit Linked Insurance Plan (ULIP)
| Depends on the chosen plan
| 5 years
|
Public Provident Fund (PPF)
| 7.10%
| 15 years
|
Sukanya Samriddhi Yojana (SSY)
| 8.20%
| N.A.
|
Equity Linked Savings Scheme (ELSS)
| 15% to 18%
| 3 years
|
Senior Citizen Savings Scheme (SCSS)
| 8.20%
| 5 years
|
Tax-saver fixed deposits
| 6% to 7.5%
| 5 years
|
2. Section 80CCD
Section 80CCD encourages individuals to save for retirement. It offers tax deductions for contributions made to the:
- National Pension Scheme (NPS)
- Atal Pension Yojana (APY)
This section is divided into two parts:
- 80CCD(1): It covers contributions made by individuals, whether salaried or self-employed, to the NPS.
- 80CCD(2): It applies to contributions made by an employer to the NPS on behalf of their employees.
It must be noted that the benefits of Section 80CCD(1) are available only under the old tax regime, while the benefits of Section 80CCD(2) are available under both old and new tax regimes.
3. Section 80D
Section 80D is a tax-saving option that allows individuals and Hindu Undivided Families (HUFs) to claim deductions for “premiums paid on health insurance” policies during a financial year. This includes not only regular health insurance but also top-up plans and critical illness policies. The significant advantage of Section 80D is that the deductions for medical insurance premiums are in addition to the Rs. 1.5 lakh limit available under Section 80C. However, this section can only be claimed by taxpayers who opt for the old tax regime.
Now, if we talk about the quantum of deduction, it varies as follows:
- For premiums paid for oneself, a spouse, or dependent children, a deduction of up to Rs. 25,000 is allowed.
- If the insured includes senior citizens (60 years and above), the deduction limit increases to Rs. 50,000.
Additionally, taxpayers can claim a deduction of up to Rs. 5,000 for preventive health check-ups.
4. Section 24
Section 24 provides three key deductions, which are:
- First, taxpayers can claim a standard deduction of 30% on the NAV of rented properties, regardless of actual expenses incurred.
- Second, for self-occupied properties, borrowers can claim deductions of up to Rs. 2,00,000 on interest paid for home loans.
- Finally, municipal taxes paid on properties can also be deducted from the Gross Annual Value (GAV) to arrive at the Net Annual Value.
5. Section 80E
Section 80E is another tax-saving option that allows individuals to claim a tax deduction on the interest paid for education loans taken for higher studies. This deduction applies to loans taken for oneself, a spouse, or children, from:
or
The deduction is specifically for the interest portion of the loan and not the principal amount. Also, the loans obtained from friends or family members do not qualify.
Now, if we talk about the maximum period, this deduction can only be claimed for a maximum of “eight years”, starting from the year the repayment begins.
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