Before planning your taxes one should be aware of the total income and tax liability in order to be smart tax saver.
The government has provided with many plans using which individuals can make better investment decision along with tax saving options.
Individuals often get stuck with 80C tax benefits only during tax planning. While there is little doubt 80C investments are best for tax saving purposes, there are other investment options which can help you save tax if invested smartly.
Here are 8 best tax saving options other than Sec 80C.
The Government of India (GOI) launched the National Pension System for individuals in May of 2009. Under the NPS, each Subscriber will open an account with Central Recordkeeping Agency (CRA) which will be identified through unique Permanent Retirement Account Number (PRAN).
The NPS offers you additional tax deduction for the investment up to Rs. 50,000 in under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under sec 80C of Income Tax Act. 1961. Returns would depend on the asset class that you choose. For example, you could select equity, which is a high risk instrument or corporate debt or government debt.
Rajiv Gandhi Equity Savings Scheme (Section 80CG)
Under this scheme individuals can invest up to Rs 50,000 in approved stocks. The tax benefits are available under Sec 80CG. However, only first time investors are allowed to invest in this scheme to claim tax benefits.
This scheme has not taken off, since being introduced during the UPA regime. There were reports that there might be an overhaul of the scheme, but, nothing has come through. A scheme that has risks associated with stock market investment. The scheme since being launched has never taken off and one is not sure on the reasons for the same. It has also not been promoted aggressively and not many investors know of this as a tax saving scheme.
In any case the amount of Rs 50,000 is too small.
Interest on education loan (Section 80E)
The deduction is allowed only on the interest repayment part, not on the principal amount of education loan. Means that only interest repayment is available for tax deduction while filing income tax return.
This deduction is over and above the 80C limit and there is no maximum limit on claiming deduction under 80E. Not many are aware of the scheme, and one needs to educate people more on this section and its benefits.
It is better parents take the loan on behalf of the children, in case the child is not taxable. This way they can save on taxes.
House rent allowance (Section 80GG)
If you are staying in a rented apartment or house and paying rent, you can claim tax deduction under Sec 80GG of the Income Tax Act.
The amount of deduction is based on the city that you are residing. Again, some cities need to be revamped to factor in an increased rentals in this city, but that has not happened so far. More details and exact break-up cannot be sought from your company, so it is best talking to the HR department on the exact tax benefits that you would get.
This is a major source of tax saving for individuals.
In the Union Budget last year, Finance Minister Arun Jaitley increased the limit on deduction on home loan interest under Section 24 to Rs 2 lakhs from Rs 1.5 lakhs earlier.
An additional deduction of Rs 50,000 on home loan interest can be claimed starting financial year 2016-17 under Sec 80EE of the Income Tax Act. However to be able to claim this deduction, you must meet certain conditions.
The principal amount continues to be a part of the overall benefits under Sec 80C. The principal amount also was hiked to Rs 1.5 lakh from the earlier limit of Rs 1 lakh.
Interest on the savings account (Section 80TTA):
Interest earned on a savings account and/or a post office savings account is allowed as a deduction. The maximum amount that can be claimed as a deduction under this section is 10,000 rupees. This does not mean that interest of up to 10,000 rupees is exempt income; you must instead report this amount as "income from other sources" in your ITRs, then claim the deduction under section 80TTA.
This deduction is not intended for the elderly can benefit from this deduction in a new section which is mentioned below. However, do not confuse this with interest earned on fixed deposits.
Any interest earned on fixed deposits is fully taxable and there is no deduction for requesting an exemption on it for the general public.
Health Insurance (Section 80D)
Individuals should take a health insurance policy, which would enable them save tax up to Rs 25,000 in case of ordinary citizens and Rs 30,000 in case of senior citizens. So, one can go ahead and take a good health insurance policy.
This is again a tax option that you have apart from the usual 80C benefits. The Sec 80D benefits also include the benefits on expenses incurred towards preventive health check ups.
Apart from the tax benefit, it is important to remember that an health insurance coverage is a must for individuals.
Donations (Section 80G)
Section 80G of income tax law provides tax benefits on amount donated to NGO's. So, it maybe time to be a little more generous than before. However, the deduction can be made only if you are donating by cash or draft.
The deduction can be either 50 per cent or 100 per cent. You have to claim this deduction when filing you tax returns and quoting of PAN number to the institution where you donated is a must. There is an entire list of institutions and establishments where you can donate.
Payment of medical insurance premium(Section 80D):
A medical insurance policy is a must these days because if you or your family get sick or have an accident, your medical bills could wipe out your savings. The amount paid as a medical insurance premium (mediclaim) is eligible for a deduction under this section. You can purchase the policy on behalf of your spouse, dependent parents or children.
If you are an undivided Hindu family (HUF), the policy can be taken out on behalf of any family member. To claim the deduction, you must first pay the premium by any method other than cash. In addition, the insurer must be approved either by the central government or by the Insurance Regulatory Development Authority of India (IRDAI). The limits for claiming the deduction under this section have increased significantly for fiscal years 18-19. You can now benefit from a deduction of up to Rs 1 lakh which was Rs 60,000 until the last financial year, but there are many sub-limits to be taken care of.
An individual can benefit from a maximum deduction of Rs 25,000 for the premium paid for himself, his spouse or his dependent children. One can get an additional deduction of Rs 25000 for the premium paid for his parents. In the case of a medical insurance premium paid for policies for the elderly, a maximum deduction of Rs 50,000 can be claimed from this financial year. Therefore, if a person takes out policies for himself, his spouse and his elderly parents, he can claim a total deduction of Rs 25,000 plus Rs 50,000, or Rs 75,000.
What is Sec 80C?
Sec 80c is the section for deduction of income tax which person get benefit by investing in specified category mentioned in the said section of Income Tax Act,1961. The benefit of the section is available to the extent of limit, i.e., Rs.1,50,000.
There are several schemes under SEC 80C like ELSS, PPF etc. The benefit of ELSS is that customer gets a market edge and also save tax through section 80C. While everybody knows the obvious instruments, we have given you some of the other benefits other than 80C.