Traditional wisdom tells everyone to maximize tax-saving investments. After all, it has a two-fold benefit of tax-saving as well as building wealth for the future. So, all possible tax-saving options should be optimized, especially the investment ones.
And while Public Provident Fund (PPF) and Life Insurance are the most popular income tax saving options, you may want to consider the other, myriad options available too, especially under Section 80C of the Income Tax Act. To remind you, you can invest up to Rs 1.5 lakh every year for a tax deduction under this section as one of the tax saving investment options.
Let’s look at the multiple 80C investments available in detail:
Investment Options U/S 80C:
Other available tax-saving deductions under Section 80C:
You can also use these tax saving options in India or tax-saving deductions to reduce your net taxable income.
• Children tuition fees: The fees paid towards your children for school tuition is eligible for tax-saving deductions U/S 80C
• Repayment of home loans:
o The repayment of the principal amount of your Home Loans can be considered as tax deductions U/S 80C. This is subject to
a limit of Rs 1.5 lakh per annum
o The interest can be used for an additional tax deduction of Rs 2 lakh U/S 24
o An additional amount of Rs 50,000 can be deduction U/S 80EE by first-time home buyers. This is only valid if the property
has a value of less than Rs 50 lakh or the loan amount is lower than Rs 35 lakh.
Other Investment Options
If your income is less than Rs 12 lakh a year and you have never invested in equity before, then you can invest Rs 50,000 in Rajiv Gandhi Equity Saving Scheme or RGESS. This gets you an additional deduction of Rs 25,000. This can be done by investing in RGESS Mutual Funds or buying some specified stock options.
2. Health Insurance:
a. The premium paid towards your health insurance plan for self, spouse and dependent children is eligible for a tax
deduction of Rs 25,000 per annum U/S 80D and
b. An additional amount of Rs 25,000 per annum for premium payment towards health insurance premium for dependent
c. The amounts are Rs 30,000 per annum if either you or your parents are senior citizens
d. So, the maximum amount you can deduct under this section is Rs 60,000 per annum.
Any donation made to any tax-saving trust or listed charitable organization qualify for a deduction U/S 80G. This is applicable only if the receipt is submitted. However, the amount of tax deduction you get on your donations varies—not all give you a 100% deduction. Donations towards some trusts like Jawaharlal Nehru Memorial Fund, National Children’s Fund, Prime Minister’s Drought Relief Fund, etc. qualify for a 50% tax deduction.
4. Savings Account:
The interest accumulation in your savings account is tax free till Rs 10,000 per annum U/S 80TTA.
5. Medical costs:
The amount you spend while taking care your differently-abled dependents can get you a tax deduction of up to Rs 1.25 lakh U/S 80(U). Medical treatments for such dependents can also help you lower your taxable income by Rs 1.25 lakh U/S 80DD.
Insurance and PPF are definitely two lucrative options but they are not the only ones. There are multiple options available for tax saving. All you need to do is choose the most appropriate one according to your risk appetite and asset allocation.
Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.