Three Tax Saving Options Beyond Section 80C

Written by : Knowledge Centre Team

2024-08-02

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Section 80C offers a deduction of up to Rs. 1.5 lakhs from your taxable income every year. Thus, it is one of the most popular sections in the Income Tax Act, when it comes to saving taxes. However, it is far from being the only section you can save tax under.

Section 80C Limits & Investments

Section 80C consists of mostly long-term investments and a few expenses, some of which are almost necessary. Thus, it should not be difficult for you to fulfil your 80C deduction limits, especially when you have a family to look after.

Following sections, investments, and expenses form part of the section 80C deduction limit of Rs. 1.5 lakhs:

Investments	Section	Min. Holding Period
- Term Insurance Plans - Unit Linked Insurance Plans (ULIPs) - Guaranteed Savings & Income Plans (Life Insurance plans) - Public Provident Fund (PPF) - Employee Provident Fund (EPF) - Equity Linked Savings Scheme (ELSS) - Sukanya Sammriddhi Yojana - National Savings Certificate - Senior Citizen Saving Scheme - 5-Year Tax-Saving FD - Infrastructure Bonds issues by the National Bank for Agriculture and Rural Development (NABARD)	80C	- Lock in period is 2 years as per sub-section (5) of section 80C - 5 years - 2 years - 15 years - NA - 3 years - Until daughter attains majority - 5 years - 5 years - 5 years - 5 years
- Pension / Annuity Plans for receiving regular income	80CCC	- NA
- Contribution to National/New Pension Scheme (NPS) Tier-I account	80CCD(1)	- NA

You can also include some of the usual expenses to the list of eligible tax deductors:

Repayment of Home Loan Principal Amount
Children’s school fee for full time/classroom education
Payment of stamp duty and registration charges on a house purchase

With investments under Section 80C, an individual or a HUF can avail of tax exemption on their annual gross income.

The rebate on investments that lowers the payable tax amount of a person at the end of the financial year is known as a general tax deduction. This is one of the largest sections for reducing your income tax liability.

However, there are other useful sections as well:

Section 80D for health insurance premium and medical expenses
Section 80CCD(1B) for NPS contribution above the usual limit
Section 24B for repayment of home loan interest

Section 80D – Health Insurance Premium

In the past year, health insurance has newfound importance because of the pandemic. However, there was seldom a time when it wasn’t important. If you are looking at your comprehensive financial plan, you will notice health insurance as one of the first things on the execution list.

The premium you pay for Mediclaim or health insurance cover makes you eligible for tax exemption under Section 80D.

Section 80D allows you to claim a deduction in the following manner on the health insurance policies or medical expenses:

1. Claim Deduction on the policies for

Your family consisting of the self, spouse, and dependent children
Your parents whether dependent or not

2. Claim medical expenses for 60 years plus family members

Your family, i.e., self and spouse
Your parents or parent in-laws

How much can you Claim Under Section 80D?

The limits for both claims are as follows:

Health Insurance Premium
- If the eldest of the insured persons is below 60 years of age: Rs. 25,000
- If the eldest of the insured persons is 60 years of age or more: Rs. 50,000
Medical expenses
- For the eligible patient who is below 60 years of age: Nils
- In case of the eligible patient who is 60 years of age or above: Rs. 50,000

Please note that deduction of medical expenses is allowed only in case there is no health insurance in force and payment is for senior citizen. It can be for individual or his family or his parents.

Thus, you can claim a maximum of Rs. 1 lakh under this section if both you and your parents are senior citizens. However, for the most part, maximum eligibility would be Rs. 75,000.

You can claim medical expenses under this section only for senior citizen parents, or if you or your spouse are above 60.

Section 80CCD(1B)

Your basic contributions to the New Pension Scheme Tier-I account will fall under the Rs. 1.5 lakhs limits. However, section 80CCD(1B) extends your limits by another Rs. 50,000.

Deduction under Section 80CCD(1) and Section 80CCD(1B) is allowed when investment is made in pension scheme notified by the Central Government.

How to Claim the Deduction Under Section 80CCD(1B)?

Section 80CCD(1B) is an extension to the section 80CCD(1). However, you can claim a deduction under this section whether you have invested money to claim deduction under section 80CCD(1) or not.

In other words, if you have exhausted your tax-saving limit under section 80C, you can invest up to Rs. 50,000 more in other schemes.

This additional investment will decrease your taxable income by up to Rs. 50,000 under section 80CCD(1B).

Section 24(b) – Home Loan Interest

Starting the financial year 2020-21, the Union Budget has given two options for estimating your taxable income and income tax:

1. Old Regime: With four-tier tax slab rates and deductions

2. New Regime: With eight-tier tax slab rates and no deductions

If you have bought or constructed a new house property using a home loan, you should follow the old regime and avail of the deductions under Section 24(b).

Section 24(b) provides a deduction of interest on the home loan from your income from house property. A loan taken for the following purposes qualifies for the rebate under this section (with limits):

If you are residing in the house property or it’s vacant
Purchase of a ready to move residential property	Rs. 2 lakhs
Construction of a house (rebate starts after the construction is complete)
• If construction is completed within five years	Rs. 2 lakhs
• If construction takes more than five years	Rs. 30,000
Repair or renovation of a residential house	Rs. 30,000
If the property is rented out	Entire Interest Amount

Conditions to Avail the Deduction

To avail of tax exemption under Section 24(b), you must own the residential property and the loan for the same should be disbursed in your name
The interest paid as service fees, brokerage, commission, prepayment charges, are not part of the exemption under Section 24(b).

How to Avail the Deduction?

The deduction is available in the following two ways:

You have a taxable income from the house property, which is reduced by the interest rebate
You have other taxable income which is reduced by the loss from house property

Self-Occupied or Vacant House

When your house is vacant or self-occupied you do not have an income from the house property. In this case, the entire Section 24(b) rebate becomes a loss from the house property. You can adjust this loss against your salary or professional income.

Thus, in the case of a self-occupied property, the deduction can reduce your taxable income from Rs. 30,000 to Rs. 2 Lakhs.

Rented-Out House

In the case of rented-out property, the deduction can be higher, as the entire interest amount is allowed as a rebate. But, if the net loss from house property is more than Rs. 2 lakhs you can only adjust the loss up to Rs. 2 lakhs against other incomes.

You can carry forward the loss for up to the next eight financial years. But it has to be adjusted only against income from house property in the next eight financial years.

These provisions of the Income Tax Act, 1961 offer you the opportunity to save and earn money without worrying about taxation.

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