Know These Legal Avenues To Lower Your Tax Liability

Many salaried employees might have received emails from their HR departments seeking proof of investments, etc, for a declaration made earlier during the financial year to avail of tax deductions.

 

The most commonly availed ones are under Section 80 C of the Income Tax Act, which offers deductions up to Rs 1,50,000 on various investments.

 

However, there are numerous other sections and options to save on taxes.

 

Diversifying your tax-saving strategy beyond Section 80C can help not only reduce your tax liability but also optimise your financial planning.

 

Let's delve into some of these lesser-known yet highly effective tax-saving avenues.

 

1. Health Insurance Premiums (Section 80D)

 

Investing in health insurance is a wise health decision and a smart tax move..

 

Under Section 80D, premiums paid for health insurance for yourself, your spouse, children, and parents can lead to substantial tax savings.

 

The limit for deduction is Rs 25,000 for individuals below 60 years, and Rs 50,000 for senior citizens.

 

This deduction is over and above the limit of Section 80C.

 

2. Disability-Related Expenses (Section 80DD and 80U)

 

Tax benefits under Section 80DD are available for the maintenance, including medical treatment, of a disabled dependent.

 

Similarly, Section 80U offers deductions for individuals with a disability. These sections are critical for supporting the differently-abled and their families.

 

3. National Pension System (NPS) (Section 80CCD)

 

Contributions up to Rs 50,000 to the NPS qualify for an additional tax deduction under Section 80CCD(1B).

 

4. Education Loan Interest (Section 80E)

 

Education is a valuable asset, and the government supports it through tax benefits on education loans.

 

Interest paid on loans taken for higher education qualifies for deduction under Section 80E.

 

The best part? There is no upper limit on the amount of interest you can claim deductions on.

 

5. Home Loan Interest (Section 24)

 

Interest on home loans can be claimed as a deduction under Section 24 of the Income Tax Act, subject to certain conditions.

This can be a significant amount, especially in the initial years of a home loan when the interest component is higher.

 

 

5. Savings Account Interest (Section 80TTA)

 

Interest income from savings accounts up to Rs 10,000 per year is tax-exempt under Section 80TTA.

 

This is a small but useful deduction for salaried individuals and others with income from savings accounts.

 

6. Donations (Section 80G)

 

Contributions to certain relief funds and charitable institutions can be claimed as deductions under Section 80G.

 

Depending on the organisation you donate to, you can claim either 100% or 50% of the amount donated as a deduction.

 

7. Rent Payments (Section 80GG)

 

For those who don't receive House Rent Allowance (HRA) but pay rent, Section 80GG comes to the rescue.

You can claim a deduction for the rent paid, subject to certain conditions and limits.

 

 

Diversifying your tax-saving strategy beyond the conventional Section 80C can lead to substantial tax savings while also helping you meet various financial goals.

 

There are numerous avenues to explore, from health insurance to education loans and savings account interest to home loan interest.

 

Prudent tax planning involves understanding and integrating these options into your financial plan.

 

Remember, the key to effective tax saving is not just about investing at the last minute but planning through the year.

It is always advisable to get your tax liability computed by a certified financial planner, so that you do not end up being mis-sold some unsuitable financial product.

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