How Can You Save More on Income Tax? A Beginner’s Guide – Part II

In our previous blog, we touched upon the multiple tax saving options that are available under Section 80C. Now, let us take a look at all the other tax-saving options available for you under the other sections.

Section 80D

Under this section of the Income Tax Act 1961, you can claim deductions of up to Rs.1 lakh for payments made towards medical insurance plans. These deductions are over and above the exemptions that can be claimed under Section 80C.

Section 80E

The amount that you pay towards repaying your education loan qualifies as a tax rebate. This loan should have been availed for your education or education of your children, spouse, or student for whom you are the legal guardian.

Section 80EE

First-time homebuyers can avail a tax benefit on the amount paid on home loans. A deduction of up to Rs.50, 000 can be claimed under section 80EE. This deduction is again, over and above the limit offered by Section 80C.

Section 80G

Engaging in charity work is rewarded with tax rebates. Under this section, you can claim tax deductions made to prescribed funds. However, donations made in cash that exceeds Rs.2,000 will not qualify as deductions unless they are made via other payment modes.

Section 80GG

Salaried individuals will be aware of the House Rent Allowance (HRA) component of the salary that deductions can be claimed on. The maximum deduction allowed is Rs.60,000 per annum. However, this rebate cannot be availed if the individual owns a house.

Section 80TTA

The deduction under this section is available only to individuals and HUFs and is allowed on:

• Interest earned on a savings bank account with a co-operative society that is engaged in banking
• Interest earned on a savings bank account with a post office
• Interest earned on a savings bank account

However, the deduction is capped at Rs.10,000.

Section 80DD

The rebate that can be claimed under this section is beneficial for those with a disability or a family member with a disability. Deductions can be claimed if you have a dependent that is differently-abled or is entirely dependent on you for maintenance. 

Section 80DDB

You can claim tax rebates on medical expenses used to treat specific ailments. The treatment must either be for yourself or a family member who is dependent on you.

Section 80U

Living with an illness is never easy. Under Section 80U, individuals who are accepted to have been at least 40% disabled by any of the ailments listed below, as certified by a medical authority can claim benefits. These include:

• Low vision
• Leprosy-cured
• Blindness
• Hearing impairment
• Mental retardation
• Locomotor disability
• Mental illness

A tax rebate of up to Rs.75,000 can be claimed. However if the disability is 80% or more, the tax rebate is Rs.1,25,000.

Section 80GGC

Under this section of the Income Tax Act 1961, you can claim tax rebates on contributions that have been made to political parties registered under Section 29A of the Representation of the People Act, 1951 and electoral trust. Up to 10% of the gross earnings can be donated to a political organization.

Understanding Tax Saving with Examples

Not sure how to use the above sections to your advantage or the impact on your tax saving goals? Let us examine the same with a couple of examples.

• Neha’s Dilemma

Neha is a 27 year old graduate who earns an annual gross salary of Rs. 7 lakhs per annum. After removing all relevant deductions such as HRA, LTA, and standard deduction, her net gross salary is Rs. 6,40,000.

Based on the current tax slab rates mentioned in Part I of our blog , the tax amount that she will have to pay is Rs.42,120, which is quite a hefty sum.

The good news here is that she can actually reduce the tax amount that she has to pay by just making a few investments.

For example, Sec 80C offers a number of investment options and since the exemption limit is one of the highest, Neha can save a good amount by investing here.

Let us assume that she has invested the following:

• Rs. 42,000 in ELSS
• Rs. 12,000 in a Term Insurance Plan

Additionally, Neha has also availed a Medical insurance plan for which she pays a premium of Rs. 15,000 per annum and will receive a rebate under Section 80D. Therefore, her investments add up to Rs. 54,000 under Sec 80C and Rs. 15,000 under Sec 80 D amounting to a total investment in tax saving schemes of Rs. 69,000. 

Now if one has to calculate the tax amount that she has to pay after factoring in her investments, Neha has to pay Rs.27,768.

Just by investing in a few tax saving schemes, she can not only secure her future better, but can also save Rs.14,352 overall.

Conclusion

While paying income tax is mandatory for most citizens of the country, the government has reduced this burden through various provisions. However, you must ensure that the tax-saving instruments you opt for are in line with your risk appetite, lifestyle, and financial goals.