Efficient Tax Saving Options Other Than 80C – Salaried employees
Tax Saving Options Other Than 80C for salaried employees and others. When somebody speaks of tax savings, generally they refer to the rebates under section 80C of the income tax act. But many overlook the fact that umpteen tax saving options are available beyond 80C rebate. You may be knowing that the maximum tax rebate possible under section 80C is limited to just Rs 1,50,000 per annum as of now. If you have already exhausted this limit and want to save more on tax, you are in the right place.
Planning your taxes in the last minute can lead to…
Little time to study investment options and make informed decisions...
Often large lumpsum investments are needed, leading to financial stress...
Could lead to emotional stress on taking wrong decisions...
Tax saving in Section 80 C - a quick review
An in-depth understanding of section 80 C can help you to maximize your take-home salary. The maximum amount allowed under section 80C exemption is Rs 1,50,000 per annum. Investment options available under this section are listed below.
- Life insurance premiums (Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be included u/s 80C)
- Employees Provident Fund- EPF (Employee usually contributes an amount of 12% of the salary + dearness allowance to the EPF. Higher voluntary contribution (VPF) is also possible if the employee desires)
- Home Loan Principal (The principal portion of the home loan repayment amount qualifies for 80C deduction)
- Equity-linked Savings Schemes -ELSS (Mutual funds which are specially designed to provide tax benefits)
- Tuition Fees (Tuition fee paid to the school, college or university on or after admission for the children.)
- National Savings Certificate – NSC (Investment in NSC qualifies for 80C rebate but the interest is compounded annually and is taxable)
- Five-year bank fixed deposits. (Term deposit with a tenure of 5 years in a scheduled bank.)
- Unit Linked Insurance Plan-ULIP ( Insurance product which provides insurance and investment opportunity on equities.
Now let us have a detailed look at the other tax saving options available.
Read more: Income Tax 2020- Best option selection helper (Calculator)
80CCD(1) - National Pension Scheme (NPS)
Investment in National Pension Scheme (NPS) – qualifies for an additional 50,000 rebate beyond the 80C limit of Rs.1,50,000. Out of the two types of accounts possible, the Income-tax rebate is available only for tier 1 accounts.
Remember that the amount can be withdrawn only after 60 years of age. 60% of the amount withdrawn (after 60 years) will be available tax-free. Balance 40% needs to be utilized compulsorily to purchase an annuity. Read more about NPS. Use the NPS calculator to know more about investment benefits.
80D - Tax Saving through Health Insurance
Health insurance is the type of insurance that provides coverages to the policyholder. Health Insurance offers significant additional tax benefits over and above section 80C limits and hence should never be ignored.
Separate levels are available for self and family, parents and senior citizens. The chart provided below will help you to understand the tax benefits in detail.
| Persons covered | Exemption Limit | Preventive Health Check Up Exemption | Total Benefit |
| Self and family | Rs. 25,000 | Rs. 5000 | Rs. 25,000 |
| Self & Family + Parents | (25,000+ 25,000) = Rs. 50,000 | Rs. 5000 | Rs. 50,000 |
| Self & Family + Senior Citizen Parents | (25,000+ 50,000) = Rs. 75,000 | Rs. 5000 | Rs. 75,000 |
| Self (Senior Citizen) & Family + Senior Citizen Parents | (50,000+ 50,000) = Rs. 1,00,000 | Rs. 5000 | Rs. 1,00,000 |
Section 80DD - Medical Expenses of disabled dependants
Expenditure incurred on medical treatment, nursing, training or rehabilitation of a handicapped dependent. The amount that can be claimed varies depending on the percentage of disability.
| Disability Percentage | Deduction Amount |
| Disability less than 40% | Nil |
| more than 40% to less than 80% | Rs. 75,000 |
| 80% or more | Rs. 1,25,000 |
Section 80DDB - Medical Expenses of Specified Diseases
Deduction under section 80DDB is allowed for the medical treatment of a dependant who is suffering from any of a specified disease mentioned below.
| Sl No | Disease | More |
| 1 | Neurological Diseases | Dementia |
| Dystonia | ||
| Musculorum Deformans | ||
| Motor Neuron Disease | ||
| Ataxia | ||
| Chorea | ||
| Hemiballismus | ||
| Aphasia | ||
| Parkinsons Disease | ||
| 2 | Malignant Cancers | |
| 3 | Acquired Immuno-Deficiency Syndrome (AIDS) | |
| 4 | Chronic Renal failure | |
| 5 | Hematological disorders | Hemophilia |
| Thalassemia |
| Age group of the person undergoing treatment | Deduction Limit |
| Up to 60 years of age | Rs. 40,000 or actual amount spent on treatment which ever is less |
| Senior citizen (60 - 80 years of age) | Rs. 1,00,000 or actual amount spent on treatment which ever is less |
| Super senior citizen (above 80 years of age) | Rs. 1,00,000 or actual amount spent on treatment which ever is less |
80E -Interest on Educational Loan
The interest portion of EMI of the educational loan is eligible for income tax deduction subject to the following conditions.
- The deduction shall be available only for loan repayments up to 8 year period. If the loan period is higher the claiming can be done only up to 8 years.
- There is no maximum limit for the claim amount.
- No tax benefit will be allowed for principal repayment.
Section 24 - Interest paid towards home loan
Interest paid towards the home loan can help you in tax saving under section 24 of the income tax act subject to certain conditions.
Conditions: (a) Construction of the house should be completed within 3 years from the end of the financial year in which the loan was taken.
(b) Interest exemption cannot be availed during the construction of the property. (c) the home loan must be for the construction or purchase of a house property.
- Maximum deduction allowed for home loans (for self-occupied houses) satisfying above conditions will be Rs 2,00,000
- If the house construction is not completed within a period of 3 years, the maximum deduction available will be Rs 30,000 only per annum under section 27.
- If the house is let out, then there will not be a cap of Rs 2,00,000 and the entire interest paid can be deducted under section 24. The rent received will become taxable.
80TTA - Interest on the savings bank account
Section 80TTA deduction is available for interest earned on savings bank accounts held in banks, post office, co-op societies, etc. The maximum deduction available under section 80TTA is Rs. 10,000 per annum. So you need not add your savings bank interest received up to 10,000 to your income.
Please note that the deduction is not available for interest from fixed deposits, recurring deposits, and term deposits and hence tax saving is not possible
80G - Donations eligible for tax deduction
Section 80G of the Indian Income Tax Act allows you a tax deduction on donations made to some relief funds and charitable organizations. The percentage of the donation allowed for exemption varies based on the type of donation.
Donations eligible for 100% deduction (without qualifying limit)
| National Defence Fund set up by the Central Government | National Children's Fund |
| Prime Minister's National Relief Fund | Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund with respect to any State or Union Territory |
| National Foundation for Communal Harmony | The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister's Cyclone Relief Fund, 1996 |
| An approved university/educational institution of National eminence | The Maharashtra Chief Minister's Relief Fund during October 1, 1993 and October 6, 1993 |
| Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district | Chief Minister's Earthquake Relief Fund, Maharashtra |
| Fund set up by a State Government for the medical relief to the poor | Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat |
| National Illness Assistance Fund | Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat |
| National Blood Transfusion Council or to any State Blood Transfusion Council | Prime Minister's Armenia Earthquake Relief Fund |
| National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities | Africa (Public Contributions India) Fund |
| National Sports Fund | Swachh Bharat Kosh (applicable from FY 2014-15) |
| National Cultural Fund | Clean Ganga Fund (applicable from FY 2014-15) |
| Fund for Technology Development and Application | National Fund for Control of Drug Abuse (applicable from FY 2015-16) |
Donations eligible for 50% deduction (Without qualifying limit)
| Jawaharlal Nehru Memorial Fund | Indira Gandhi Memorial Trust |
| Prime Minister's Drought Relief Fund | Rajiv Gandhi Foundation |
Sec 10(13A) - House Rent Allowance (HRA)
For many employees, house rent allowance (HRA) is a part of the salary received.
A deduction is permissible u/s 10(13A) of the income tax act subject to certain conditions if you are staying in a rented house and get HRA from the employer.
The exemption allowed is the least of :
- Actual HRA received
- 50% of the basic salary
- Excess of rent paid over 10 % of the annual salary
80GG - House rent paid where no HRA is paid
80GG allows the individuals who do not receive HRA to claim a deduction in respect of house rent paid. Such house rent paid shall be for his or her own stay.
The following conditions need to be met to claim deduction under this section:
The individual should not be in receipt of any House Rent Allowance from his employer.
The individual has filed a declaration in Form No 10BA.
The assessee or his spouse or minor child or HUF of which he is a member, should not own any residential house property at the place where he ordinarily resides or performs office duties or causes his business or profession.
The assessee should not own any residential accommodation in his or her own occupation, at any other place, whose value is to be determined as per Sec 23(2)(a) or Sec 23(4)(a).
Quantum of deduction shall be the least of the following:
Actual Rent paid minus 10 percent of the adjusted total income.
5,000/- per month.
25% of Adjusted Total Income.
Summary of Tax Saving options available
| Section | Description | Limit |
| 80C | PF, Insurance Premium, Home loan principal etc. | 1,50,000 |
| 80CCD(1) | National Pension Scheme (NPS) | 50,000 |
| 80D | Health Insurance | 25,000 - 1,00,000 |
| 80DD | Medical Expense - Disabled person | 75,000 or 1,25,000 |
| 80DDB | Medical Expense - Specified diseases | 40,000 - 1,00,000 |
| 80E | Interest on Educational Loan | No Limit |
| 24 | Interest portion of home loan EMI | Maximum 2,00,000 |
| 80TTA | Interest on savings bank account | 10,000 |
| 80G | Donations | 100% or 50% |
| 10 (13A) | House Rent Allowance (HRA) | Lower of (HRA / 50% salary / Excess of Rent over 10% annual salary) |
| 80GG | House Rent Allowance (Without HRA) | Lower of (Rent - (10% income) / 5000 salary / 25% of total income) |
Other Tax Saving Exemptions
Standard Deduction
The standard deduction is basically a deduction allowed in income tax, irrespective of the expense incurred or the investment made by the individual.
Two types of standard deductions are allowed in India
- Standard deduction from salary: Rs 50,000 from FY 2019-20.
- Standard deduction from rental income: at the rate of 30% on rental income.
Section 87A
Section 87A rebate provides for a marginally lower payment of taxes to individuals earning an income below the specified limit. Actually it helps to reduce the tax burden of the lower-income bracket.
| Total Income | Tax payable before cess | Rebate u/s 87A | Tax payable + 4% Cess |
| 2,70,000 | 1,000 | 1,000 | 0 |
| 3,60,000 | 3,000 | 3,000 | 0 |
| 4,90,000 | 12,000 | 12,000 | 0 |
| 5,00,000 | 12,500 | 12,500 | 0 |
| 5,50,000 | 22,500 | Nil | 23,400 |
Conditions:
- You must be a resident individual and
- Total income after deduction should not exceed Rs 5,00,000
- Rebate is limited to Rs 12,500
Income Tax Slab 2019 - 20
| Income Tax Slabs And Rates (FY - 2018-19) (AY 2019-20) www.insurancefunda.in | |||
|---|---|---|---|
| Income | Up to 59 years of age | 60 to 79 years of age | Age 80 and above |
| 0 - 2.5 lakhs | Nil | Nil | Nil |
| 2.5 - 3 lakhs | 5% of income above 2.5 lakhs | Nil | Nil |
| 3 - 5 lakhs | 2500 + 5% of income above 3 lakhs | 5% of Income above 3 lakhs | Nil |
| 5 - 10 lakhs | 12500 + 20% of income above 5 lakhs | 10000 + 20% of income above 5 lakhs | 20% of income above 5 lakhs |
| Above 10 lakh | 112500 + 30% of income above 10 lakhs | 110000 + 30% of income above 10 lakhs | 100000 + 30% of income above 10 lakhs |
| If income is above 50 lakhs 10 % of tax as surcharge | |||
| If income is above 1 crore 15 % of tax as surcharge | |||
| Educational Cess at the rate of 4% has to be paid on tax + surcharge | |||
Download the Income-tax slab and rates provided above for your future reference.
Online Income Tax Calculator - FY 2019-20
Read more: 7 ways to become a non-tax payer
Section 10 - Income exempt from tax
| Section 10(1) - Income earned through agricultural means | Section 10(23BBA) - Income earned by regulatory bodies of institutions affiliated with religion and charity |
| Section 10(2) - Any amount received by an individual through a co-parcener from an HUF | Section 10(23BBB) - Income received by the European Economic Community |
| Section 10(2A) - Income received by partners of a firm, as shared between them | Section 10(23BBC) - Income received through SAARC funded regional projects |
| Section 10(4)(i) - Any interest that has been paid to a person who is not a resident Indian | Section 10(23BBE) - Income received by the IRDA |
| Section 10(4)(ii) - Any interest that has been paid to the account of a person who is not a resident Indian | Section 10(23BBH) - Income received through Prasar Bharti |
| Section 10(4B) - Any interest that has been paid to a person who is not a resident Indian, but of Indian origin | Section 10(23C) - Income received by any individual through certain specified funds |
| Section 10(5) - Concession on travel given to an employee who is also a citizen of India | Section 10(23D) - Income earned via Mutual Funds |
| Section 10(6) - Any income earned or received by a non-Indian citizen | Section 10(23DA)j - Income earned via a Securitisation Trust |
| Section 10(6A), (6B), (6BB), (6C) - Government tax paid on the income of a foreign firm | Section 10(23EA) - Income earned through an IPF |
| Section 10(7) - Allowances received by government employees stationed abroad | Section 10(23EB) - Income received by the Credit Guarantee Trust for Small Industries |
| Section 10(8) - Income earned by foreign employees in India under the Cooperative Technical Assistance Program | Section 10(23ED) - Income exemption of IPF |
| Section 10(8A) - Income earned by a consultant | Section 10(23DFB) - Income exemption of specified income received by Venture Capital Firms, Funds or Businesses |
| Section 10(8B) - Income earned by a consultants staff or employees | Section 10(24) - Income earned by authorised trade unions |
| Section 10(9) - Income earned by any family member of a foreign employee in India under the Cooperative Technical Assistance Program | Section 10(25) - Income earned via provident funds and superannuation funds |
| Section 10(10) - Gratuity | Section 10(25A) - Income earned via Employees State Insurance Fund |
| Section 10(10A) - The commuted value of the pension earned by an individual | Section 10(26), 10(26A) - Income earned by Schedule Tribe Members |
| Section 10(10AA) - Any amount earned via encashment of leave at the time of retirement | Section 10(26AAN) - Income earned by an individual of Sikkimese origin |
| Section 10(10B) - Compensation paid to workers due to relocation | Section 10(26AAB) - Marketing regulation with regards to agricultural produce |
| Section 10(10BB) - Any remittance obtained as per the Bhopal Gas Leak Disaster Act 1985 | Section 10(26B) - Income earned by corporations established for the upliftment of backward tribes and classes |
| Section 10(10BC) - Any compensation obtained in the event of a disaster | Section 10(26BB) - Income earned by corporations established for the protection of Minority interests |
| Section 10(10C) - Compensation in lieu of retirement from a PBC or any other firm | Section 10(26BBB) - Income earned by corporations established for former servicemen |
| Section 10(10CC) - Any income received through taxation on perquisites | Section 10(27) - Income earned by cooperative societies established for protection of scheduled castes and tribes interests |
| Section 10(10D) - Any amount acquired via a life insurance policy | Section 10(29A) - Income received by Community Boards |
| Section 10(11) - Any payment received via the Statutory Provident Fund | Section 10(30) - Income earned in the form of subsidies via the Tea Board |
| Section 10(12) - Any payment received via a recognised or authorised Fund | Section 10(31) - Income earned in the form of subsidies via the concerned Board |
| Section 10(13) - Any payment received through a Superannuation Fund | Section 10(32) - Income earned by a child in accordance with Section 64 of the Income Tax Act |
| Section 10(13A) - House Rent Allowance | Section 10(33) - Income earned through Unit Trust of India capital asset transfer |
| Section 10(14) - Allowances utilised to meet business expenses | Section 10(34) - Income earned in the form of dividends through an Indian firm |
| Section 10(15) - Income received in the form of interest | Section 10(34A) - Income earned by a shareholder through the buyback of unlisted companies |
| Section 10(15A) - Income received by an Indian firm through the lease of an aircraft from a foreign firm or government | Section 10(35) - Income received through the sale or transfer of Unit Trust of India units as well as other mutual funds |
| Section 10(16) - Income in the form of a scholarship | Section 10(35A) - Income from a securitisation trust that is exempt |
| Section 10(17) - Allowances granted to MLCs, MLAs or MPs | Section 10(36) - Income received on the sale of shares under specific conditions |
| Section 10(17A) - Income received in the form of a government award | Section 10(37) - Any capital gains made on the mandatory acquirement of land in relation to urban agriculture |
| Section 10(18) - Income received in the form of pension by winners of awards for heroism | Section 10(38) - Any long term capital gains made from share and security transfers that fall under the purview of Security Transaction Tax |
| Section 10(19) - Income received by family members of the armed forces in the form of pension | Section 10(39) - Any income received from any international event or function relating to sports |
| Section 10(19A) - Income received from a single palace of an ex-ruler | Section 10(40) - Any income acquired in the form of a grant from a company deemed to be a subsidiary of the parent company |
| Section 10(20) - Income received by a localised body or authority | Section 10(41) - Any income received on any asset transfer of a company or project that conducts power distribution, generation and transmission |
| Section 10(21) - Income received by an association involved with scientific research | Section 10(42) - Any income earned by any authority that has been established by more than one country |
| Section 10(22B) - Income earned by a news or broadcasting agency | Section 10(43) - Any income in relation to reversal of mortgage |
| Section 10(23A) - Income earned by certain Professional Institutes | Section 10(44) - Income generated through the NPS Trust |
| Section 10(23AA) - Income acquired through Regimental Fund | Section 10(45) - Any allowance or perks granted to the chairman or any member of the UPSC |
| Section 10(23AAA) - Income acquired through an employee welfare fund | Section 10(46) - Any income that comes under the category of specified income with regards to specific authoritative bodies |
| Section 10(23MB) - Insurance pension fund income | Section 10(47) - Any income that is exempt under the category of infrastructure debt fund |
| Section 10(23B) - Income earned by village industry development institutions | Section 10(48) - Any income earned by a foreign firm or company due to crude oil sales within India |
| Section 10(23BB) - Income earned by state level Khadi and Village Industries Board | Section 10(49) - Any income earned by the NFHC (National Finance Holdings Company) |
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Anish L J is a ‘Financial Planner’ and member of Chartered Insurance Institute(CII), London and Insurance Institute of India. He is also a finance, insurance and software consultant. He thoroughly follows the developments in finance, insurance, and other related sectors.