Tax Savings
Income from various sources such as salary, business profits, rental income, interest, and capital gains is subject to taxation under the Income Tax Act. However, Indian taxpayers can reduce their tax liability by investing in eligible schemes and claiming deductions under various sections of the Income Tax Act.
Section 80C reduces tax liabilities by allowing deductions from total taxable income in a financial year if your investments come under the following schemes and expenses:
Eligible Schemes / Expenses | Description |
|---|---|
Public Provident Fund (PPF) | Government-backed long-term savings scheme with tax-free returns |
Employees’ Provident Fund (EPF) | Retirement savings scheme for salaried individuals |
Equity Linked Savings Scheme (ELSS) | Mutual funds with a 3-year lock-in and market-linked returns |
National Savings Certificate (NSC) | Fixed income government savings bond with a 5-year tenure |
5-Year Tax-Saving Fixed Deposit | Bank FD with a 5-year lock-in and fixed interest |
Life Insurance Premiums | Premiums paid for policies for self, spouse, or children |
Sukanya Samriddhi Yojana | Scheme for the girl child’s future education and marriage |
Senior Citizens Savings Scheme (SCSS) | Government scheme for citizens aged 60+ offering attractive interest |
Principal Repayment on Home Loan | EMI principal component of a home loan qualifies for deduction |
Tuition Fees | Tuition fees paid for up to 2 children’s education (only full-time studies in India) |
ULIPs (Unit Linked Insurance Plans) | Insurance-cum-investment plans with a lock-in of 5 years |
Tax-saving investments and expenses not only help you save money but also encourage disciplined financial planning. Here’s a comprehensive look at key income tax deduction sections that help maximize your tax savings:
| Section | What It Covers | Eligible Deduction | Ideal For |
|---|---|---|---|
| Section 80C | Investments in PPF, ELSS, Tax-saving FDs, Life Insurance premiums, Principal repayment on home loan, Children’s tuition fees | Up to ₹1.5 lakh | Salaried & self-employed taxpayers |
| Section 80CCD (1B) | Additional deduction for investments in National Pension System (NPS) | Up to ₹50,000 (over and above 80C) | Long-term retirement savers |
| Section 80D | Premiums paid for health insurance for self, spouse, children, and parents | Up to ₹1 lakh (including senior citizen parents) | Families and senior citizens |
| Section 80E | Interest paid on education loans for higher studies | No upper limit (for 8 years) | Students or parents repaying education loans |
| Section 80EE | Additional deduction on home loan interest for first-time buyers | Up to ₹50,000 | First-time home buyers |
| Section 80G | Donations to charitable trusts and NGOs | 50% to 100% of donation (subject to limits) | Taxpayers involved in philanthropy |
| Section 80GG | Rent paid if no HRA is received | Up to ₹60,000 per year | Self-employed or those not receiving HRA |
| Section 80TTA | Interest income from savings bank accounts | Up to ₹10,000 | Individuals and HUFs (non-senior citizens) |
| Section 80DD | Maintenance and medical treatment of dependent with disability | Up to ₹75,000 (or ₹1.25 lakh for severe disability) | Families supporting differently-abled dependents |
| Section 80DDB | Medical treatment of specified critical illnesses | Up to ₹40,000 (₹1 lakh for senior citizens) | Individuals or dependents with specified ailments |
| Section 80U | Deduction for individuals who are 40% or more disabled | Up to ₹75,000 (₹1.25 lakh for severe disability) | Differently-abled individuals |
| Section 54EC | Investment in specified bonds to save on long-term capital gains tax | Up to ₹50 lakh | Investors with LTCG from sale of property/assets |
