Make the most of Section 80 deductions
Section 80 is a government initiative designed to encourage people to save for the future and invest in insurance and retirement plans. It not only helps reduce your income tax for the year but also lets you earn on long-term investments, which can be very helpful when you need them.
Section 80C
You can claim up to Rs 1.5 lakh under Section 80C in a financial year by investing in specific tax-saving options like:
– Unit Linked Investment Plans (ULIPs)
– Equity-Linked Savings Schemes (ELSS)
– Public Provident Fund (PPF)
– National Saving Certificates (NSC)
– Principal Repayment of a home loan
– Life Insurance Premium payments
– Senior Citizens Savings Scheme (SCSS)
Section 80D
According to the Income Tax Act, 1961, Section 80D allows you to deduct premiums paid for medical insurance. You can claim up to Rs 25,000 annually, and if one of the insured individuals is 60 years or older, the limit increases to Rs 30,000. This deduction applies to policies covering you, your spouse, your parents, and your children.
Explore beyond 80C deductions
If you earn more than Rs 2.5 lakh, consider other investments to further lower your tax bill, in addition to Section 80C options like ELSS mutual funds. Here are some choices:
– Medical insurance: Under Section 80D, you can claim up to Rs 15,000 per year for premiums paid for yourself, your spouse, or children. For your parents, the deduction is also Rs 15,000, and it can go up to Rs 20,000 if they are senior or super senior citizens.
– Home loan: Section 24 allows a tax deduction of up to Rs 1.5 lakh per year for home loan interest.
– Donations: Section 80G provides a tax benefit for certain donations to specified funds or institutions.
Restructure your salary
Adjusting your salary structure can substantially reduce your tax burden. By adding certain components to your salary package, you can enjoy more benefits without extra expenses. Consider these options:
– Claim Leave Travel Allowance (LTA) twice in a four-year period
– Claim House Rent Allowance (HRA) if you live in a rented home
– Claim a transport allowance of Rs 800 per month
– Use food coupons like Sodexo, which are tax-exempt up to Rs 60,000 annually
While many invest in ELSS funds just to save on taxes, these funds also offer the benefit of capital growth. Don’t just invest in ELSS or other tax-saving instruments for the Rs 1.5 lakh deduction—think beyond and focus on their potential for returns. Happy investing!
