There is a common perception that we need to save and invest our money in tax-saving investment avenues to save tax. However, have you ever wondered what to do when you are running short of funds and you have to reduce your tax outgo? Then, saving income tax definitely becomes a tedious task. Thankfully, there are some tax provisions that can help someone save tax without making any investment. Here they go:
1. Children Tuition Fees
There are various tax-saving investment options available under Section 80C of the Income Tax Act, 1961, such as ELSS, PPF or NSC. This section, however, also provides tax benefit on expenses like children’s tuition fees. The quantum of deduction, however, should not exceed the overall limit of Rs 1.5 lakh.
“Children’s tuition fees for up to two children paid to their school, college, university or any other educational institution in India qualify for deduction under this section. However, no benefit on payment of donations or development fees or private tuition fees is provided as these are not covered in full-time course,” says CA Abhishek Soni, Founder, tax2win.in.
2. Home Loan
Every home loan EMI has two parts, namely principal and interest. Both the components are eligible for deduction under the various sections of the Income Tax Act.
The principal component of a home loan is available as deduction under section 80C. However, the overall limit of deduction is Rs 1.5 lakh. “Within this limit you also get the deduction of charges like stamp duty, registration fees etc. Please note that if this deduction is availed, then the property must not be sold within five years from the date of possession. Otherwise the deduction availed shall be reversed,” says Soni.
Additionally, deduction of interest paid on home loan is allowed under section 24, i.e. it enjoys separate tax saving. The limit of deduction is Rs 2 lakh in that case. Further, you can also double your tax saving by taking a joint home loan.
3. Medical Insurance u/s 80D
It is one of the avenues which gives you deduction over and above the Rs 1.5-lakh limit. You can save tax through the payment of premium on the health insurance of yourself, your family and your parents. The ceiling limit of deduction is under:
For Yourself & Family (Spouse and dependent children):
If you or any of the family members are below the age of 60 years, then the maximum deduction of Rs 25,000 per annum is allowed. However, if you or any family member is of 60 years or above, then the benefit shall be raised to Rs 30,000 per annum.
For Your Parents (Dependent or Independent):
If either of your parents are below the age of 60 years, then the maximum deduction of Rs 25,000 per annum is allowed. However, if either of them is 60 years or above, then the limit shall be increased to Rs 30,000 per annum.
Additional Deduction (Preventive Health Check up):
A deduction of Rs 5,000 can be claimed every year on expenses related to health check-ups, which is included in the above said limits of Rs 25,000 or 30,000 as the case may be.
“As per the Finance Bill 2018 , the limit for deduction under Section 80D for senior citizens (60 years or above) has been increased to Rs 50,000 from Rs 30,000. Moreover, another benefit that has been extended to senior citizens through the Budget 2018 is that in addition to premium on health insurance and preventive health checkup, senior citizens can even claim the medical expenses incurred. Earlier, this benefit was only available to the individuals above 80 years (Super Senior Citizen). Now, this benefit has been extended to the individuals of 60 years or above i.e. senior citizens as well,” informs Soni.
4. Donation u/s 80G
Are you aware that an act of charity can also save your taxes? Yes, it can. You can save tax by making donations for charity, social or philanthropic purpose under section 80G of the Income Tax Act. However, this relief comes with a clause, i.e. not every charity will give you 100% tax saving. Donations have been classified into various classes, namely 100% or 50% with or without restriction and accordingly the quantum of deduction will depend on the class.
Please note that from the Financial Year 2017-18 onwards, cash donations exceeding Rs 2000 will not be allowed as deduction under this section.
5. Deduction of rent paid u/s 80GG
Living in a rented accommodation and paying a huge amount of rent? Then this section is for you. If you are a self employed or salaried individual who does not receive HRA from the employer, then you can claim deduction under this section.
However, “one thing to be kept in mind is you should not own any residential property at a place, where you currently reside or carry on business or profession and for which your ‘Income from House Property’ is calculated as a self occupied property. If this is the case, then no deduction under section 80GG shall be allowed. The maximum amount of deduction under this section shall not exceed Rs 60,000,” says Soni.
6. Education Loan
The deduction under Section 80E is available only for individual taxpayers. Section 80E helps you save tax if you have taken an education loan for the higher education of yourself or spouse or children.
The deduction under this section is allowed only on the repayment of interest and not on the principal component of the loan. The time limit for deduction is 8 years starting from the year in which repayment starts or until the interest is fully repaid, whichever is earlier. However, the good news is that there is no maximum limit for claiming deduction under this section and the loan is eligible for higher studies in India as well as outside India.
Certain deductions have been allowed under the Income Tax Act through which tax saving can be done. However, for availing them, proper tax planning is required during the year.