The last date to save tax for the financial year 2021-22 is March 31, 2022. With a little more than three months away from completing your tax planning exercise for the assessment year 2022-23, you should get going if you haven’t yet started the tax saving process.
While there are several options to save tax under the existing tax regime, there is also the new tax regime (NTR) that you might have already opted for. If you have opted for NTR for FY 2021-22, even though tax concessions are not allowed, you may still save tax, which we will look at later on.
Meanwhile, if you are sticking with the old or the existing tax regime, the most common tax saving options fall under Section 80C of the Income Tax Act. Some tax savers or expenses such as investment in PPF, NSC, ELSS, Life insurance including tuition fees for children or principal payments of home loan EMI are the tax deductions that you can avail of. However, as the upper limit is Rs 1.5 lakh per FY, most taxpayers exhaust this limit and yet want to bring taxes lower.
Here are a few tax savers other than Section 80C to help you save more tax:
NPS Account – Avail tax benefit under Section 80CCD(1B)
If you already have the NPS account or you may open one to save tax under section 80CCD(1B). An additional deduction of up to Rs 50,000 is allowed for those who are either employed or self-employed taxpayers. Although, the same amount cannot be claimed both under both the sections, the deduction under Section 80CCD(1B) is over and above the deduction availed under Section 80CCD(1) i.e. Under Section 80C.
Health insurance premium – Avail tax benefit under Section 80 D
Having health insurance coverage through an individual plan or Family Floater is a must for all members of the family. The premium that you pay even for parents qualifies for deduction. Currently, for those who are below age 60, the limit stands at Rs 25,000. This includes self, spouse and children and the health cover could be a Mediclaim, Family Floater, Critical Illness etc. the premium paid towards any of these schemes gets deducted from the gross income under section 80D.
For those who are above age 60, the limit is Rs 50,000. If both the individual taxpayer and the parent are more than 60 years, the deduction can be availed up to Rs 1 lakh. Any payment made towards preventive health check-ups up to Rs 5,000 also qualifies for tax benefit but it has to be within the overall limit.
Paying Rent – Avail tax benefit under Section 80GG
Self-employed and salaried individuals who do not get HRA as part of their salary but are staying on rent are allowed tax benefit under Section 80GG. Such taxpayers can avail tax deduction on the rent paid for their accommodation, subject to a cap of Rs 5,000 per month or 25% of one’s total income for a year or actual rent paid in excess of 10% of one’s total income, whichever is lower.
Education loan repayment – Avail tax benefit under Section 80E
The tax benefit on interest paid in an educational loan qualifies for an income tax deduction when the loan is for higher education. As per the Income Tax Act, “higher education means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so.”
The interest on loans taken for higher education is eligible for deduction from the total income under Section 80E with no monetary ceiling on the interest that can be claimed as a deduction. The loan needs to be taken from a financial institution or an approved educational institution for educating oneself, children or even spouse. The deduction shall be allowed for the initial assessment year and seven assessment years immediately succeeding the initial assessment year or till the entire interest is claimed, whichever is earlier.
Home loan interest payment – Avail tax benefit under Section 24
In a home loan EMI, the principal portion repaid during the year qualifies for deduction under section 80C within the cap of Rs 1.5 lakh, while the interest paid is deductible up to Rs 2 lakh under section 24. The tax benefit is available only if the possession of the house is within 5 years from the date of the loan.
Income from deposits – Avail tax benefit under Section 80 TTB
Under Section 80TTB of the income tax act, interest income earned from deposits qualifies for a deduction from one’s gross total income. The maximum limit under section 80 TTB is Rs 50,000 in a year. Importantly, the benefit of section 80TTA, which allows a deduction of the interest income (up to Rs 10,000) from the savings account, is not available to the senior citizens.
New tax regime – Deduction allowed for NPS
In the new tax regime, taxpayers will have to forgo most of the income tax exemptions and deductions to avail the lower tax rates. However, one important deduction will still remain available for the benefit of taxpayers, which is Section 80CCD(2) of the Income Tax Act, 1961. Section 80CCD(2) pertains to contributions made by the employer into the employee’s account of a notified pension plan such as National Pension System (NPS). Not all employers may be contributing towards your NPS account but if they do, salaried individuals may stand to gain. One may have to restructure one’s salary package if required.