India recently celebrated its 166th Income Tax Day on July 24th. The day is celebrated to remind taxpayers that taxes are a duty and not a burden. That being said, there is a lot of negative connotation around the concept of taxes, most of which stems from a lack of knowledge. If you keep yourself updated with tax laws, your tax journey will be simple.
The government implemented a new tax system in FY 2020–21 with lower slab rates but eliminated most exemptions and deductions, such as 80C and 80D. You now have a choice to opt for either:
- New Tax Regime: Lower tax rates but no deductions
- Old Tax Regime: Higher tax rates but you can claim deductions
You need to choose the regime that works for you based on your income, tax slab, and investments. If you are unclear on which one to choose, it is best to speak with a tax adviser.
As previously stated, you can lower your taxable amount and claim deductions if you opt for the Old Tax Regime. The Indian Income Tax Act offers a number of exclusions and deductions to help you legally reduce your tax liability. Although Sections 80C and 80D are the most widely used, there are numerous other sections that might lower your tax obligation.
Let’s take a look at all of these:
Section 80C
You can claim deductions of up to ₹1.5 lakh per financial year from your gross total income under Section 80C. It applies to individuals and Hindu Undivided Families (HUFs).
Eligible investments and expenses include:
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Equity Linked Savings Schemes (ELSS) – Mutual funds with a 3-year lock-in period
- Life insurance premiums (for self, spouse, or children)
- Principal repayment on home loans
- 5-year fixed deposits with banks or post offices
- Tuition fees for children (up to 2 children)
Section 80D
You can claim deductions of up to ₹1.5 lakh per financial year under premium paid on health insurance policies under Section 80D. These can be claimed separately above the ₹1.5 lakh deductions under Section 80C.
Eligible investments include:
- Up to ₹25,000 for self, spouse, and dependent children
- Additional ₹25,000 for parents (₹50,000 if parents are above 60 years)
- Extra ₹5,000 for preventive health check-ups (within the overall limit)
PS: Insuring senior citizen parents can get you a maximum total deduction of ₹1 lakh under 80D.
Other Tax Deductions to Lower Your Tax Burden
| Section | Description | Key Details |
| 80CCD(1B) | NPS Deduction | An extra allowance ₹50,000 under NPS, beyond the allowed deduction under Section 80C. |
| 80E | Education Loan Interest | Deduction on entire interest component of education loans for higher studies. Can be claimed for 8 years from the start of the loan date. |
| 80G | Donations | Contributions to approved charitable institutions/funds qualify for 50% or 100% deduction. |
| 80TTB | Interest Income for Senior Citizens | Deduction up to ₹50,000 on interest income from savings accounts, FDs, etc., for senior citizens. |
| 24(b) | Home Loan Interest | Deduction up to ₹2 lakh per year on interest for self-occupied homes. No limit for let-out properties. |
| 10(14) | HRA Exemption | House Rent Allowance is partially or fully exempt if you live in rented accommodation. |
To further increase your saving, you can combine these deductions:
- ₹1.5 lakh under 80C
- ₹50,000 under 80CCD(1B)
- ₹25,000–₹1 lakh under 80D
- ₹2 lakh under Section 24(b)
Managing your tax obligations involves more than just saving money; it requires thoughtful financial planning. Sections like 80C and 80D contain the most simple strategies for reducing your taxable income, if you choose the Old Tax Regime. However, by examining options under 80CCD, 80E, 24(b), 80G, and other laws, you can achieve additional savings. By combining these strategies and planning ahead, you may maximise your tax outflow and ensure that more of your hard-earned money stays with you.
