Ask any financial planner and he will tell you that tax planning is an important part of financial planning. However, when it comes to reducing taxable income, individuals often believe that they will get tax exemptions by investing in financial products that are exempt only under Section 80C of the Income Tax Act. While it is prudent to make tax saving under Income Tax Section 80C to secure your future, there are various types of tax savings options other than 80C which can be explored.
1 - National Pension System
If you choose to invest in the National Pension System (NPS) launched by the Government of India (GOI) in 2009, you become eligible for additional tax deduction under sub-section 80 CCD(1B) for investment up to Rs50,000. This is over and above the deduction of Rs1.5 lakh already available under Section 80C of the Income Tax Act.
2 - Payment towards medical insurance premium
Any premium that is paid for medical insurance towards securing your or your family members’ health is eligible for tax deductions under Section 80D of the Income Tax Act. You are eligible for a maximum deduction of Rs25,000 per year on the premium you pay for self, spouse and your children. The maximum tax deduction limit for premium paid for the medical insurance of senior citizens is Rs50,000.
3 - Rent towards accommodation
Did you know that you are eligible for tax deduction if you stay in a rented accommodation? If you are a salaried employee receiving housing rent allowance (HRA), a part this amount is exempt under Section 10 (13A) of the Income Tax Act. The amount of deduction is based on the city you are residing in. For employees who are salaried and live in rented house but do not receive HRA can claim deduction under Section 80 GG. This is applicable to self-employed individuals too. The least of the following is available for exemption under this section:
Rent paid in excess of 10% of total income
25% of the total income
Rs5,000 per month
4 - Interest paid on education loan
In case you have taken an education loan for your higher studies or that for your spouse/children/ any student who identifies you as his or her legal guardian, you are eligible for a tax deduction on the interest you pay under Section 80E.
5 - Charitable donations
If you open up your purse strings for charitable donations, the GOI allows you to benefit from tax deductions under Section 80G of the Income Tax Act. You can claim this deduction while filing your returns by providing a stamped receipt from the organisation as proof of your donation.
Thus, there are many other ways to reduce your taxable income apart from investing in tax savings instruments under Section 80C alone. Now that you know the features and benefits of options other than 80C, you can become a smart tax saver in 2019!