Income tax deductions on life insurance premium, an employee's contribution towards EPF (Employee Provident Fund), PPF (Public Provident Fund), children's tuition fees, pension plans, principal repayment on home loans and a host of other investment options are covered under Section 80C of the Income Tax Act.
Under Section 80C, the maximum tax exemption limit is Rs 1.5 Lakhs per annum. The various investments that can be claimed as tax deductions under section 80C are listed below;
- PPF (Public Provident Fund)
- EPF (Employees’ Provident Fund)
- 5 years Bank or Post office Tax saving Deposits
- National Savings Certificates (NSC)
- ELSS Mutual Funds (Equity Linked Saving Schemes)
- Children’s Tuition Fees
- Life Insurance Premium
- Sukanya Samriddhi Account Deposit Scheme
- SCSS (Post office Senior Citizen Savings Scheme)
- Repayment of Home Loan (Principal only)
- National Pension System
- NABARD rural Bonds
- Stamp duty charges for purchase of a new house
Many taxpayers exhaust the Rs 1.5 lakh tax deduction limit under Section 80C. Additional investment in the various options will not provide further tax benefits. Here are some of the sections under income tax laws, apart from Section 80C, that help in cutting down the income tax burden.
1) NPS ( National Pension Scheme )
Additional income tax deduction of Rs 50,000 is allowed for contribution to the National Pension Scheme (NPS) under Section 80CCD. This extra deduction of Rs. 50,000 on NPS increases the total deduction allowed under Section 80C and 80CCD to Rs. 2 lakh.
2) NPS Contribution Routed Through Employer.
Under the NPS corporate model, an employee can deposit the contribution directly or route the contribution through the employer he or she is working with. Employer's contribution to NPS up to 10 per cent of basic salary (plus DA) is allowed deduction under Section 80CCD (2). There is no cap for this deduction but the total deduction claimed for contribution by the employer should not exceed 10 per cent of the salary.
3) Deduction of interest on housing loan.
Under Section 24B of the Income Tax Act, interest paid up to Rs. 2 lakh on housing loan is allowed as deduction from taxable income. On rented properties, the borrower can only claim deduction of up to Rs. 2 lakh per year after adjusting for the rental income. And the amount above Rs. 2 lakh can be carried forward for eight assessment years.
4) Deduction under Section 80EE
Under Section 80EE, an additional deduction of Rs. 50,000 is available over and above the limit of Section 24B on interest paid on home loans if the person is buying a house for the first time (the person must not own any other residential property on the date of sanction of loan).
5) Deduction under Section 80D
An individual can claim deduction of up to Rs. 25,000, if he or she is below 60 years of age, and Rs. 30,000 if above 60 years of age, towards medical insurance premium paid for self, spouse and children. Additional deduction of Rs. 25,000 is available if one has bought medical insurance for his parents. This deduction can go up to Rs. 30,000 if parents are above the age of 60.
6) Deduction under Section 80E
A taxpayer can claim deduction for interest paid on education loan for him, spouse or children. There is no upper limit on the amount of deduction.
7) Deduction under Section 80DD
If an individual has dependants who are differently-abled, he or she can claim deductions up to Rs. 75,000 for expenses on their maintenance and medical treatment under this section. This deduction can increase to Rs. 1.25 lakh in case of severe disability.
8) Deduction under Section 80DDB
An individual can claim deduction of up to Rs. 40,000 for treatment of certain diseases for self and dependants. The deduction can go up to Rs. 60,000 if the taxpayer is above 60 years and up to Rs 80,000 if above 80 years.
9) Section 80GG
If you don't receive HRA from employer and make payments towards rent, you can claim deduction under section 80GG towards rent that you pay. The deduction is lowest of the following:
(a) Rs 5,000 per month
(b) 25% of total income
(c) Rent paid less 10% of income
10) Section 80G Donations To Charity
Donations to charitable organisations are entitled to up to either 50 per cent or 100 per cent deduction but the highest deduction allowed is capped at 10 per cent of the donor's total income.