What will bring you happiness?
Maybe you are saving a little extra money, getting a discount on your favourite apparel, or saving more on taxes. Income tax deductions have always saved taxpayers money and also inclined more people to pay taxes for the benefits they receive. And when we talk about deductions, 80C is the most powerful thing. It allows a maximum deduction of ₹1.5 lacks annually from the taxpayer’s total income. The benefit of this deduction can be availed by Individuals and HUFs.
Why 80c?
The popularity of the investment plans under 80C is such that it is the first choice of tax-saving option by taxpayers by default. Therefore, it is the tax-saving avenue that has gained much popularity among tax savers. Individual taxpayers and HUFs both qualify for deductions under Section 80C.
Section 80C has two subsections. Section 80CCC and Section 80CCD. It focuses on retirement and pension plans. These are not as popular as the other options. However, with the growing awareness about the benefits of deductions, many have started investing in the National Pension System, which provides an additional deduction of ₹50,000 over and above the deduction of ₹1.5lakh.
But when people thought that this wasn’t just the only deduction one could have, they started to explore more, and there came what we call the financial geeks. Since COVID, people have explored more and more to bring into light the various other deductions like 80D, 80EEA, and so on. Financial Influencers from different social platforms have helped individuals to explore other areas of deductions.
Let us explore some of them:
- 80TTA: Any interest income earned from savings account deposits can be claimed under Section 80TTA. Nonetheless, any amount above ₹10,000 shall be chargeable to tax in the hands of the assessee. If there are multiple savings accounts in different banks, the cumulative interest in all the bank accounts is considered and is taxed under ‘income from other sources. If such interest income exceeds ₹10,000 in a year, only the excess amount over the cap is taxable at rates depending upon the aggregate annual income of the assessee.
- 80TTB: This section is applicable solely to people over the age of 60, i.e., Senior Citizens. It is as good as 80TTA, but here, the maximum deduction on interest income is ₹50,000. Senior citizens who own a fixed deposit or savings account at banks, cooperative banks, and post offices, thereby having interest income from such deposits and accounts, qualify for the deduction under Section 80 TTB.
- 80E: Any Income that is spent to meet the interest component of education loans is not taxable under this section. Such an education loan can be unsecured or availed against collateral, depending upon the number of funds required. However, such waivers are only granted for the first 8 years of loan repayment, starting from the year in which you start repaying the loan or until the interest is fully repaid, whichever is earlier. Any income spent to meet the interest burden beyond 8 years is taxable.
- 80D: Deductions on health insurance premiums are part of section 80D. A person can claim a deduction for the health insurance premium and expenses incurred for self, spouse, dependent children, and parents. Provision for tax rebate under Section 80D is extended to preventive health check-up expenses as well, which is limited to 5,000.00 only.
- 80DD: Individuals and Hindu Undivided Families (HUF) bearing the expenses for the treatment and well-being of a disabled family member can claim exemptions on total income spent to cover such expenses under Section 80DD. The coverage limit is determined based on the percentage of disability, wherein people having 40-80% disability are eligible for deductions up to ₹75,000. If the disability is at least 80%, then a deduction of up to ₹1.25 lakhs can be claimed.
- 80GG: It was one of the most overlooked sections and, currently, the most used section. It provides relief to those individuals who do not receive any house rent allowance but are paying rent for their stay. The only condition is that one should be residing in the rented property. The maximum deduction that can be availed is ₹60,000.
- 80EEA: First-time home-buyers can claim additional interest benefits amounting to ₹1,50,000 above Section 24(b) and 80C on home loan EMIs, provided the property value is less than ₹45 Lakh till March 31, 2022. This effectively makes way for up to ₹3.5 Lakh tax-saving other than Section 24(b).
- 24(b): This section provides a deduction of a maximum of ₹2 Lakh on payment of the interest component of a home loan, provided the construction is completed within five years of the loan tenure. This can be claimed beyond deduction u/s 80C.
Well, I can keep on mentioning the various deductions one could claim while filing Income Tax Return.
Benjamin Franklin coined the famous phrase, “A penny saved is a penny earned.” That sentiment may have been true two hundred years ago, but these days a penny saved can be two pennies earned with interest! We urge you to save every extra penny when we order food from Zomato or apparel from Myntra.
Then why shouldn’t we explore areas to save extra in terms of tax? One should properly plan their expenses and investments in advance to save every extra ounce lawfully and diligently. It not only saves our taxes but helps in long-term investments.
Thus, there are several ways for tax saving other than Section 80C, which can effectively increase your total wealth in the long term. Most such tools act as a comprehensive investment tools as well, allowing realizing higher returns or reducing obligatory expenses.
Writer: Barsha Agarwal
Team, MyGoalMySip
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