While section 80C is undoubtedly the most popular section to save tax, there are other tax provisions or sections that help you save on tax. It’s crucial for you to look at them to save tax beyond 80C.
In fact, exploring them to save tax can help you better plan this all-important exercise and make sure you don’t rush into decision-making. So, what are these tax saving options, and how can you invest in them? Let’s find out.
To save taxes, some other investment options beyond 80C deduction that you can consider are:
Section80D helps you save on tax by qualifying medical insurance premiums that you pay towards your health insurance policy. In other words, the premiums you pay for health insurance are eligible for deduction under section 80D. The table shows the amount eligible for tax deduction under various circumstances:
|
Scenarios (Premiums Paid For) |
Tax Deduction Allowed |
|
Self, spouse, and dependent children (below 60 years of age) |
Rs. 25,000 |
|
Self, spouse and dependent children + parents (below 60 years of age) |
Rs. 50,000 |
|
Self, spouse and dependent children below 60 years but parents above 60 |
Rs. 75,000 |
|
The family’s eldest member above 60 and parents also above 60 |
Rs. 1 lakh |
Parents aspire to give the best education to their children, especially higher education. In this regard, they opt for an education loan. The interest you pay on an education loan qualifies for tax exemption under section 80E of the Income Tax Act, 1961. However, note that the principal component of the EMI is not eligible for exemption under section 80E.
Owning a home is a dream for most. Easy availability of home loans has made this dream possible for the majority. However, home loans help you save taxes on two fronts. The principal component of the EMI qualifies for tax exemption under section 80C.
On the other hand, the interest paid is eligible for tax exemption under section 24(b). In case of a self-occupied house, the maximum deduction you can claim in a financial year on the interest paid is Rs. 2 lakhs.
There are provisions whereby donations made to charitable institutions are exempt from tax deduction under section 80G. The deduction amount varies on the institution and the section under which it’s registered.
For instance, 100% of the amount contributed is eligible for exemption if you contribute to the prime minister's National Relief Fund. Thus, donating to charitable organisations is a prudent way to save taxes.
The interest earned by your bank’s savings account also qualifies for tax exemption under section 80TTA. Interest income up to Rs. 10,000 is eligible for exemption under this section.
However, anything beyond it is added to your income and taxed as per the income tax slab. Also, note that the Rs. 10,000 limit is the combined interest rate from all your savings accounts.
Section 80CCD(1b) further allows you to lower your tax liability by Rs. 50,000 on contributions up and above Rs. 1.5 lakhs to the National Pension System (NPS).
The NPS is a prudent investment vehicle to save for retirement and ensure the golden years of your life are spent stress-free. Today, any Indian citizen can invest in the NPS online or offline.
Contribution towards scientific research and rural development qualifies for tax exemption under section 80GGA. It is one of the most viable tax saving options.
The question is should you look at these tax provisions only to save taxes? While tax saving is a vital aspect, investing in instruments under the sections mentioned above helps you accomplish various other crucial life goals. Let’s see how.
Given the spike in health care costs over the years, medical insurance is an absolute must. It safeguards savings from taking a dip when faced with a medical contingency and ensures funds are not a paucity in receiving the possible treatment.
Also, COVID-19 has driven home the importance of having health insurance in one’s portfolio. Having a medical cover also lets you address other crucial commitments with ease.
Education loan provides the much-needed funds for your children’s higher education and helps them secure their future. Education inflation is higher than retail inflation and has been growing at a fast clip which has made higher education an expensive proposition.
It bridges the shortfall in the corpus and ensures you have the desired funds at your disposal to meet various higher education expenses in India and abroad.
Home loans make your dream of buying your house a reality. They give you desired funds to buy your home and build an asset for the future. A home can also be your source of rental income in the future, should the need arise. A home loan allows you to accomplish a critical life goal with ease.
A bank savings account helps you manage daily expenses and also aids you in parking some money for an emergency. On top of it, the interest it earns, though less, adds to your overall income and can come in handy to address additional expenses.
With the days of pre-defined pension all but over, it’s vital to build a sizeable retirement nest. The NPS is an ideal avenue to build a sizeable retirement corpus and ensure you live life on your terms once you hang up your boots. It allows you to invest in different asset classes as per your risk tolerance.
Upon turning 60, you can withdraw 60% of the corpus as a lump sum while utilising the remaining 40% to buy an annuity plan for pension. Contribution to charitable organisations, scientific research, and rural development allows you to participate in nation-building activities and contribute to society’s welfare.
Investing in most of the above instruments to save taxes is straightforward. Here’s how you can invest in them:
You can buy a health insurance plan offline or online. For offline purchase, visit your insurer's office with the documents, fill up the proposal form, and provide the relevant documents. For buying online, visit the insurer’s website, fill up the proposal form and upload the relevant documents. You can also buy from aggregator portals that list policies from multiple insurers.
Irrespective of the mode chosen, make sure to fill up the proposal form correctly, as concealing any information could lead to claim rejection.
Many financial institutions disburse education loans. Once you zero-in on a lender, complete the formalities to avail the loan. Read the terms and conditions well and compare different offerings before sealing the deal.
The home loan market has evolved as a buyer’s market with loan interest rates at decadal lows. You can opt for a home loan from a bank, NBFC, or housing finance company. Before availing a loan, check the following:
Just like an education loan, make sure to go through the fine print and understand the terms and conditions to avoid surprises later.
Opening a bank’s savings account is as easy as it gets. All you need to do is walk into the nearest bank branch with your KYC documents and you can open your account within minutes. Make sure to maintain the minimum average balance to avoid penalties.
You can invest in the NPS online or offline. For online account opening, visit the eNPS website and complete the procedure. If you want to open offline, visit any points of presence appointed by PFRDA, furnish your KYC documents, and fill up the application form. To know the online and offline account opening process in details, click here.
As evident, it’s crucial to invest in instruments to save tax beyond 80C. Investing in the ones mentioned above not only helps you lower your tax outgo but also ensures you can address other essential goals with ease. With the start of the new financial year, get started with planning now to avoid making flawed decisions.
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