Tax planning – Beyond the obvious Section 80C

The moment you type “save income tax” on the internet, you will be flooded with articles telling you all about Section 80C and all that it includes. But what if we tell you that you do not need to rely solely on this to lessen your tax burden. Read on to know other ways (investments and expenses) that will help you in tax planning.

1. Section 80D

The rising cost of quality healthcare has made medical insurance a necessity these days. But they do more than just take care of your health issues. Health insurance premiums (paid for self or specific family members) qualify to save income tax. The limit is Rs. 25,000 (premium paid for self, spouse and dependent children) and additional Rs. 50,000 for senior citizen parents (or Rs. 25,000 for parents below the age of 60 years). If the policyholder is also a senior citizen, then the limit gets enhanced to Rs. One Lakh. 

Expenses incurred towards preventive check-ups are also eligible to save income tax. The limit is Rs. 5000 (for self or eligible family members) or Rs. 7000 (for senior citizen parents). This is an additional benefit i.e. over and above the premium payment amount.

2. Section 80DD

Expenses incurred towards taking care of a disabled or differently-abled person qualify to save income tax. The expenditure can be for spouse, children and dependent siblings or parents. The purpose of the expenses could be training, rehabilitation or medical treatment of the concerned person. The maximum deduction amount permissible every year under this section is Rs. 75000. The limit can be increased to Rs 1.25 lakhs in case the person falls under the category of severely disabled i.e. at least 80% disability level (as certified by a certified medical professional)

If the taxpayer is claiming the expenses for self, then the applicable section would be Section 80U. In that case, no other person will be allowed to claim the deduction under Section 80DD for the taxpayer, even with proper tax planning.

3. Section 80E

It is often said that an investment in knowledge pays the best interest. No wonder, it also helps you to save income tax. The interest paid on loans taken for educational purposes qualify for deduction from your total income. The loan can be taken for higher studies within as well as outside the country. The beneficiary of the loan could be self, spouse, children or any student for whom you act as the legal guardian. The only condition is that the loan should have been taken from a bank or other authorized financial institution. It cannot be a loan amount from a friend or a relative. 

4. Section 80G

Philanthropy not only helps the recipient but also you. Donations to specific charitable institutions, relief funds or such schemes can help you save income tax liabilities. An amount equivalent to (50% or 100%, depending on the donee) can be claimed as a deduction for your income tax calculations. Post Budget 2017, you are not permitted to claim a deduction (donation amount more than Rs. 2000) if the same has been made in cash.

Similarly, a donation to political parties can also be claimed as a deduction. The deduction is equivalent to the donation amount. Cash contributions are not eligible for this benefit.

5. Section 80TTA

This section allows you to claim a deduction (up to Rs. 10,000) from your interest income. It includes interest earned on a savings account (with the post office, banks or co-operative societies involved in banking activities) 
 

Final Words

Tax planning is essential to ensure that you do not end up paying more than you need to. Do not restrict yourself to just Section 80C. Make full use of the other avenues available to save income tax. As a wise person once said – Penny saved is a penny earned!