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Tax Saving Investments – Quick guide on planning in advance

People frantically run to make tax-saving investments at the end of the year when they are nearing the deadlines to finalize tax-saving investments. They do so to minimize their tax burden. But many times this can go in vain, and may not give expected gains when you look back after some time.

The reason for the failure of the selected investment option can be attributed to the failure in proper planning. It’s essential to plan the ways for tax saving at the very beginning of the financial year itself.

Let’s take a look at how you can evade tax legally.

Understanding section 80 c thoroughly can help you minimize the taxable amount on your net salary. The maximum amount applicable under Sec 80C is Rs. 1.5 lakhs per annum.

Financial planners say that the choice of investments to save income tax under Section 80C should be in line with your financial goals and wealth creation, not just avenues to save tax.

Here’s a list of investment options applicable under section 80C 

  1. Unit Linked Insurance Plan-ULIP ( Insurance product which provides insurance and investment opportunity on equities.)
  2.  Equity-linked Savings Schemes -ELSS (Mutual funds which are specially designed to provide tax benefits)
  3. Life insurance premiums (Any amount that you pay towards life insurance premium for yourself, your spouse, or your children  can be included u/s 80C)
  4. Employees Provident Fund- EPF (Employee usually contributes an amount of 12% of the salary + dearness allowance to the EPF. Higher voluntary contribution (VPF) is also possible if the employee desires)
  5. Home Loan Principal (The principal portion of the home loan repayment amount qualifies for 80C deduction)
  6. Tuition Fees (Tuition fee paid to the school, college, or university on or after admission for the children.
  7. National Savings Certificate – NSC (Investment in NSC qualifies for 80C rebate but the interest is compounded annually and is taxable)
  8. Five-year bank fixed deposits. (Term deposit with a tenure of 5 years in a scheduled bank.)

According to section 80CCE, the maximum aggregate deduction that can be claimed under section 80C, section 80CCC, and section 80CCD cannot exceed more than Rs 1.5 lakhs. This section allows a deduction from gross total income for contributions made to pension schemes of the Central Government.

Tax saving: Thinking beyond 80C

Exhausted your 80 C limits? Don’t lose heart. Umpteen tax saving options are available beyond the 80C rebate.
Let’s look at some of the options ahead of you if you have crossed the lines.

1. 80CCD(1) - National Pension Scheme (NPS)

Investment in National Pension Scheme (NPS) – qualifies for an additional 50,000 rebate beyond the 80C limit of Rs. 1,50,000. Out of the two types of accounts possible, the Income-tax rebate is available only for tier 1 accounts.

Besides, investment up to ₹ 50,000 is deductible from taxable income under Section 80CCD (1B) of the Income Tax Act, 1961. This deduction is in addition to ₹ 1.5 lakh allowed under Section 80CCD.

 (1)Under current income tax laws, 40% of the amount of accumulated corpus in NPS at age 60 can be claimed as tax-exempt. The rest is taxable unless invested in purchasing an annuity plan.

Though the minimum initial contribution for the NPS tier 1 account is Rs.500.It is generally regarded that a contribution of at least Rs 1000 per year can ensure a decent pension after your retirement.

NPS also has a provision that allows you to make a partial withdrawal of up to 25% of your contribution for specific expenses like children’s higher education or construction or the purchase of the first house or for medical treatment. This withdrawal is tax-free.

2. Section 80G. Income Tax Deductions for Donations

Section 80G- Donations to specified funds or charitable institutions. Section 80G of the I-T Act allows donations made to specified relief funds and charitable institutions as a deduction from gross total income.  Section 80G of the I-T Act allows donations made to specified relief funds and charitable institutions as a deduction from gross total income before arriving at taxable income.

3. Section 80D: Income Tax deduction for medical expenditure

Section 80D – Deduction of Rs. 15,000 for medical insurance of self, spouse, and dependent children and Rs. 20,000 for medical insurance of parents above 65 years.

4. Leave Travel Allowance

You can use  your Leave Travel Allowance for your holidays, which is available twice in a block of four years. In case you have been unable to claim the benefit in a particular four- year block, you could now carry forward one journey to the succeeding block and claim it in the first calendar year of that block. Thus, you may be eligible for three exemptions in that block.

5. Section 24 & section 80EE: Save more taxes on home loans

In addition to 80 C, You can use your home loan efficiently to save more tax. Section 24 of the Indian Income Tax Act, 1961 takes into consideration the amount of interest an individual pay for home loans. This is also known as “Deductions from income from house property.” It allows you to claim tax exemptions on the interest amount of your home loan maximum tax deduction limit under section 24 is 2 lakh.
After this, you can claim the additional benefit of rs 50,000 under section 80EE. Therefore, this deduction is in addition to the Rs 2 lakh limit allowed under section 24.


6. section 80E: Tax saving from education loan

tax savings - student loan

Providing quality education has been a concern of the populace in recent years.
inspired by the rising cost of education as well as the need to provide youth who were keen to pursue their education a way out, the concept of education loan got introduce in the 1990s. These days you can not only easily avail of an education loan, but you can also benefit from the tax deductions available when repaying this loan.

Once you avail of an education loan, the interest paid (which is a component of your EMI) on the education loan is allowed as a deduction under Section 80E of the Income Tax Act, 1961. This deduction is available for a maximum of 8 years or till the interest is repaid, whichever is the best part is that there is no limit on the deduction amount. The benefit of the deduction is available for a maximum of 8 years or till the interest is paid- whichever is earlier.

How do I claim deductions under Section 80e?

To claim deduction under section 80E, the assessee needs to avail loan from any financial institution or a recognized charitable institution. Deduction Section 80E cannot be availed towards the interest paid to a relative or employer towards a loan taken for higher education
‘Student loan interest’ is the interest you paid during the year on a qualified student loan. It includes both required and voluntarily re-paid interest payments. You may deduct the lesser of $2,500 or the amount of interest you paid during the year.

7. Section 80TTA: Tax saving from savings account

Section 80TTA provides a deduction of Rs 10,000 on interest income. This deduction is available to an Individual and HUF. Maximum Deduction – The maximum deduction is limited to Rs 10,000. If your interest income is less than Rs 10,000, the entire interest income will be your deduction Remember that .deduction under Section 80TTA is not allowed on interest earned on time deposits such as fixed deposits or recurring deposits. senior citizens will be not able to claim deduction under this section.

The final note

There are several ways to save tax. Using them wisely can help you boost your savings and secure a sound financial future.


Ashin S Anish

Mr. Ashin S Anish is a financial market analyst, certified from the Indian School of Business. A certified Money manager from the University of California, Irvine, Cybersecurity tools, and cyberattacks specialist certified by IBM, Certified in Artificial Intelligence from deep, Certified in Portfolio and Risk Management from the University of Geneva and Certified in Microeconomics Principles by the University of Illinois. He is also an avid money manager who believes that you have to be agile as a monkey with money matters...

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