From Savings Account To Donations: 10 Tax Saving Options If You Have Exhausted Section 80C Limit

From PPF, home loan principal repayment, and tax-saving mutual funds (ELSS) to insurance premiums, Section 80C of the Income Tax Act is crowded with lots of tax-saving options.

That is what often leads a lot of taxpayers to rush towards this section to focus on tax saving. But what happens when the Rs 1.5 lakh limit available for tax deduction per year under this section gets exhausted?

How can you then save tax beyond Section 80C if you still have to?

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Well, fret not, as there are a plethora of tax-saving options available besides the overcrowded Section 80C. Curious to know?

Read on as we explain 10 other tax-saving options other than the ones available under Section 80C:

1.Health insurance premium

While your life insurance premium can be claimed as a tax deduction under Section 80C, the premium you pay for health insurance is eligible to be claimed as a tax benefit under Section 80D of the Income Tax Act.

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The limits to claim tax deduction under Section 80D depends on who is included under the health insurance cover and their age. Hence, depending on the taxpayer¡¯s family members, such as spouse, parents and children for whom the insurance is taken, the limit could be from Rs 25,000-Rs 1 lakh.

Also Read: 7 Benefits Of Buying Health Insurance Right Away

2. Repayment of an education loan

Many of us who begin earning after finishing our higher education tend to have the burden of repaying our education loan's EMIs. While you manage your finances in the early stages of your career, do not miss out on availing the tax benefit on an education loan, if you fall into the taxable income bracket. The loan should have been taken for the higher education of self, spouse or children or for a student for whom the individual is a legal guardian.

Also, the education loan should be taken from any bank / financial institution or any approved charitable institution.

The interest component of your education loan EMI repayment can be claimed as tax benefit under Section 80E of the Income Tax Act. This tax benefit can be claimed by either the parent or the child (student), depending on who repays the education loan.

Taxpayers can claim the deduction from the year they start repaying the interest on the education loan and in the seven immediately succeeding financial years or until the interest is paid in full, whichever is earlier. There is no limit to the deduction claimed on the interest repayment.

3.Interest component of home loan EMI

Home loans are one of the biggest financial commitments we make in our financial life. It acts as a bridge between the dream of owning a home and reality. And while you repay the home loan EMIs, remember that the principal component is eligible for tax deduction under Section 80C.

But as far as the interest component is concerned, home loan borrowers can claim tax deduction under Section 24 of the income tax. The maximum tax deduction that a taxpayer can get here on interest payment of home loan taken for a self-occupied property is Rs 2 lakhs.

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In case the property for which the home loan has been taken is not self-occupied and is rented or deemed to be rented, no maximum limit for tax deduction has been prescribed, and as a taxpayer, you can take a deduction on the whole interest amount under Section 24.

4. Additional tax saving with NPS

Not many taxpayers are aware of this additional tax deduction available with NPS. Individual taxpayers can save additional tax by investing up to Rs 50,000 in NPS tier 1 account, under 80CCD(1B). This is over and above the Rs 1.5 lakh tax deduction benefit available under Section 80C. So, this additional investment in NPS can take your total benefit from NPS to Rs 2 lakh.

5. Deduction on rent for those not receiving HRA

While most of us must be knowing that employees receiving HRA can claim a tax deduction on the rent paid by them under Section 10(13A), however, do you know that even those living in rental accommodation but not receiving HRA as a part of their salaries or non-salaried people living rented accommodation can claim a deduction for their rent expense under Section 80GG of the Income Tax Act.

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The deduction amount would be the least of the following: Rs 5,000 per month, 25% of the total income, or the actual rent paid in excess of 10% of the total income.

Also Read: Why Most Rent Agreements In India Are Only For 11 Months

6. Interest paid for loans taken to purchase e-vehicle

Given the environmental benefits of EVs, the government has been promoting citizens to buy an electric vehicle. One of the steps taken by the government towards its vision of making electric vehicles (EVs) affordable to consumers and making it an additional incentive for people to buy them, is by providing a deduction of up to Rs 1.5 lakh per year under section 80EEB, for interest payable on loan availed to purchase EVs.

The individual taxpayer may have an electric vehicle for personal use or for business use. To avail this deduction, the loan must be taken between 1st April 2019 to 31st March 2023.

7. Interest earned from savings account

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More often than not, taxpayers are unaware of this benefit available under Section 80TTA. This section makes interest income of up to Rs 10,000 p.a. earned from savings accounts tax-free, beyond which the interest income becomes taxable as per the tax slab of the depositor.

8. Disabled dependent's medical expenses

If, as a taxpayer, you are looking after disabled dependents, you can claim a tax deduction on expenses under Section 80DD. This deduction is offered to help taxpayers take care of their disabled family member who is dependent on them.

Section 80DD defines disabled dependents as spouse, child, parents, or siblings (brother/sister). In the case of HUF, a disabled dependent can be any member of the HUF. To claim deductions under this section, the disabled dependent should not have claimed deductions under Section 80U (which is in the case where the taxpayer is disabled). Also, the disabilities that are covered under this section include blindness, low vision, locomotor disability, hearing impairment, mental retardation, mental illness, autism, and cerebral palsy.

As far as the medical expenses against which deductions can be claimed are concerned, they include any expenditure made towards medical treatment, nursing, training, rehabilitation of a dependent person with a disability, and any amount paid as premium for a specific insurance policy designed for such cases as long as the policy satisfies the conditions mentioned in the law.

How much can be claimed as deduction?

Well, the deduction allowed varies depending on whether the dependent person has a disability or severe disability.

A taxpayer can claim a tax deduction up to ? 75,000 in a financial year if the dependent person has at least 40% of any of the specified disability.

A taxpayer can claim a tax deduction up to ? 1.25 lakh in a financial year if the dependent person has at least 80% of any of the specified disability, which is considered to be a severe disability.

Also remember that taxpayers need to submit a medical certificate to prove the status of their dependent.

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Also Read: How To Invest In Real Estate 'Without' Actually Buying A Property

9. Treatment of specified diseases for self/dependent

Another way to save tax beyond Section 80C is by utilizing the benefit under Section 80DDB. This section allows taxpayers to claim deductions for treatment of eligible diseases as specified in Rule 11DD of the Income Tax Act for self or any of their dependents. Dependents can be spouse, children, parents and siblings.

Some of the diseases included in Rule 11 DD include malignant cancers, full-blown AIDS, chronic renal failure, haematological disorders and neurological disorders like dementia, Parkinson's disease, etc leading to disability of 40% and above.

But remember that the deduction can only be claimed only on submitting the relevant prescription from the list of specialists specified as per section 80DDB.

If the person requiring treatment is a senior citizen, then the maximum deduction available is either upto Rs 1 lakh per annum or the actual amount paid whichever is less. For others, the deduction has been capped at Rs 40,000.

10. Specific donations

This might not be a surprise for many. Yes, doing the noble act of donating can help you save tax.

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If you make any donations to an approved charitable institution, you can claim deduction under Section 80G of the income tax act. Under Section 80G, any donations made in cash exceeding Rs 2,000 will not be allowed as a deduction. Donations above Rs 2,000 should be made in any mode other than cash to qualify under Section 80G.

Depending on the institution to which you donate, tax deductions can be 50% or 100% of the donation amount but to a maximum of 10% of the adjusted gross total income of the taxpayer.

And that's not all. Under Section 80GGA, deductions for donations made towards scientific research or rural development are allowed. This tax benefit is allowed to all assessees except those who have an income (or loss) from a business and/or a profession. In this case, the donations can be made in the form of a cheque, a draft, or cash. However, cash donations over Rs 2,000 are not allowed as deductions. 100% of the amount donated or contributed is eligible for deductions.

Also Read: PPF vs ELSS vs Tax Saver Bank FD

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