The Financial Year 2022-2023 is coming to an end soon. It is important that you, as a taxpayer, be informed of the deductions available on total tax liability and plan accordingly to ensure maximum tax savings.
With the right investments and planning, salaried individuals can reduce their tax liability and increase their savings. Since the gross savings of Indian Households fell to 10.8% in FY 2021-2022, a much lesser figure in comparison to the 15.9% recorded in FY 2020-2021, it becomes all the more important that necessary steps are taken to give a boost to your savings, by not only financial planning, but also tax-planning.
One of the most popular and effective tax-saving options for salaried individuals is investing in Equity-Linked Savings Scheme (ELSS) mutual funds. These mutual funds not only help in saving taxes but also provide an opportunity to create wealth in the long run. The investments made in these funds are eligible for tax deductions under Section 80C of the Income Tax Act, and the returns generated are tax-free, up to 1 Lakh Rupees.
Another popular tax-saving option for salaried individuals is the National Pension System (NPS) and Public Provident Fund (PPF). Both of these schemes provide tax benefits under Section 80C of the Income Tax Act, along with the long-term savings for retirement. NPS is a pension scheme that allows individuals to invest in equity, debt, and government securities, while PPF is a savings scheme that offers fixed returns.
Medical insurance premium and charitable donations are other tax-saving options that should not be ignored. Taxpayers can claim a deduction of up to Rs 25,000 for the premium paid for medical insurance for self, spouse, and dependent children. Additionally, donations made to specified charitable institutions are also eligible for tax deductions under Section 80G of the Income Tax Act. Notably, donations made in kind are not eligible for tax deductions.
Sukanya Samriddhi Yojana is a savings scheme for the girl child and also provides tax benefits under Section 80C of the Income Tax Act. Home loan repayment is also eligible for tax benefits under section 80C of the Income Tax Act. Taxpayers can claim a deduction of up to Rs 2 lakh for the principal repayment of a home loan.
Make sure you keep safe all the relevant bills, vouchers and receipts while filing the Income Tax Returns and afterwards.
The following deductions are available to salaried taxpayers. It is pertinent to note that only the deduction under Section 80CCD(2) is available to taxpayers opting for the New Tax Regime.
Section 80C
Life Insurance Premium
Provident Fund
Subscription to certain equity shares
Tuition Fees
National Savings Certificate,
Housing Loan Principal
Other various items
Section 80CCC
Annuity plan of LIC or other insurer towards Pension Scheme
Section 80CCD(1)
Pension Scheme of Central Government
A combined limit of ₹1,50,000/- is applicable on the deductions listed above.
Section 80CCD(1B)
Deduction towards payments made to Pension Scheme of Central Government, excluding deduction claimed under 80CCD (1)
A maximum deduction of ₹50,000/- can be availed in this regard.
Section 80CCD(2) – Available in New Tax Regime also.
Deduction towards contribution made by an employer to the Pension Scheme of Central Government.
If Employer is a PSU, State Government or Others: Deduction limit of 10% of salary
If Employer is Central Government: Deduction limit of 14% of salary
Section 80D
Deduction towards payments made to Health Insurance Premium & Preventive Health check up for Self/spouse or dependent children and parents.
₹ 25,000 (₹ 50,000 if any person is a Senior Citizen). It can also be availed for Medical Expenditure incurred on a Senior Citizen, if no premium is paid on health insurance coverage.
₹ 5,000 for preventive health check up, included in above limit.
Section 80DD
Deduction towards payments made towards Maintenance or Medical treatment of a Disabled Dependent or Paid/Deposited any amount under relevant approved schemes.
Flat deduction of ₹ 75,000/- available for a person with Disability, irrespective of expense incurred.
The deduction is ₹1,25,000/- if the person has Severe Disability (80% or more).
Section 80DDB
Deduction towards payments made towards Medical treatment of Self or Dependant for specified diseases
Deduction limit of ₹ 40,000/- (₹ 1,00,000/- for Senior Citizen)
Section 80E
Deduction towards interest payments made on loan for higher education of Self or relative
Group.
Total amount paid towards interest on loan taken can be availed.
Section 80EE
Deduction towards interest payments made on loan taken for acquisition of residential house property where the loan is sanctioned between 1st April 2016 to 31st March 2017
Applicable deduction limit is ₹ 50,000/- on the interest paid on loan taken.
Section 80EEA
Deduction available only to individuals towards interest payments made on loan taken for acquisition of residential house property for the first time where the loan is sanctioned between 1st April 2019 to 31st March 2022. Also the deduction under Section 80EE should not have been claimed, in order to avail this deduction.
Deduction limit of ₹ 1,50,000/- on the interest paid on loan taken applicable.
Section 80EEB
Deduction towards interest payments made on loan for purchase of Electric Vehicle where the loan is sanctioned between 1st April 2019 to 31st March 2023.
Deduction limit of ₹ 1,50,000/- on the interest paid on loan taken.
Section 80G
Deduction towards Donations made to prescribed Funds, Charitable Institutions, etc.
Donation are eligible for deduction under the below categories:
Note: No deduction shall be allowed under this section in respect of donation made in cash exceeding ₹ 2000/-.
Be sure to obtain a stamped receipt when making a donation to a fund, trust, or institution. The receipt should include the name, address, PAN, and 80G registration information of the Trust or Institution, as well as the donor’s name, address, and donation amount. These receipts are important for record keeping and providing proof of the donation.
To ensure that your qualified donations can be availed for 100% deduction under the Income Tax Act, make sure to obtain a signed Form 58A from the organization or institution. Without this form, the donation will not be considered eligible for the full deduction.
Section 80GG
Deduction towards rent paid for house & applicable to only those who are self-employed or for whom HRA is not part of Salary.
Least of the following shall be allowed as deduction:
Rent paid reduced by 10% of Total Income – ₹ 5,000/- per month
25% of Total Income (excluding long term capital gains, short term capital gains under section 111A or income under section 115A or 115D)
Note: Form 10BA to be filled for claiming this deduction.
Section 80GGA
Deduction towards Donations made for Scientific Research or Rural Development
Donation are eligible for deduction under the below categories:
Research Association or University, College or other Institution for
Scientific Research
Social Science or Statistical Research
Association or Institution for Rural Development
Conservation of Natural Resources or for Afforestation
PSU or Local Authority or an association or institution approved by the National Committee for carrying out any eligible project
Funds notified by Central Government for Afforestation
Rural Development
National Urban Poverty Eradication Fund as setup and notified by Central Government
Note: No deduction will be allowed under this Section in respect of donation made in cash exceeding ₹2000/- or if Gross Total Income includes income from Profit/Gains of Business/Profession.
Section 80GGC
Deduction towards Donations made to Political Party or Electoral Trust.
The political party must be registered under Section 29A of the Representation of the People Act, 1951. Any donation/contribution made to any other political party would not qualify for deduction under Section 80GGC.
Section 80TTA
Deduction on interest received on saving bank accounts by Non-Senior Citizens
Deduction limit of ₹ 10,000/-
Section 80TTB
Deduction on interest received on deposits by Resident Senior Citizens
Deduction limit of ₹ 50,000/-
Section 80U
Deductions for a resident individual taxpayer with Disability
Flat ₹75,000/- deduction for a person with Disability, irrespective of expense incurred.
Flat ₹1,25,000/- deduction for a person with Severe Disability (80% or more), irrespective of expense incurred.
Rebate under Section 87-A is also notable in this instance. Resident Individuals whose Total Income is not more than ₹5,00,000/- is also eligible for a Rebate of up to 100% of income tax or ₹ 12,500/- whichever is less. This Rebate is available in both tax regimes, old and new alike.
The selection of the appropriate tax-regime for each year, taking into consideration the differences between the new and old regimes is also important. Generally, salaried individuals benefit more from the old regime whereas pensioners have a lesser tax liability in the new regime. It is important to plan investments well in advance and consult with a financial advisor to make informed decisions and take full advantage of the tax-saving opportunities.
In conclusion, tax planning is an essential aspect of personal finance, and with the right investments and planning, salaried individuals can reduce their tax liability and increase their savings. Equity-Linked Savings Scheme (ELSS) mutual funds, National Pension System (NPS), Public Provident Fund (PPF), Sukanya Samriddhi Yojana, home loan repayment, medical insurance premium, and charitable donations are some of the popular tax-saving options that can be availed by salaried tax paying individuals.
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