Efficient Tax Saving Options Other Than 80C – Salaried employees

(Last Updated On: January 5, 2020)

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...

Large investment

Often large lumpsum investments are needed, leading to financial stress...

Tax savings 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.

  1. 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)
  2. 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)
  3. Home Loan Principal (The principal portion of the home loan repayment amount qualifies for 80C deduction)
  4. Equity-linked Savings Schemes -ELSS (Mutual funds which are specially designed to provide tax benefits)
  5. Tuition Fees (Tuition fee paid to the school, college or university on or after admission for the children.)
  6. National Savings Certificate – NSC (Investment in NSC qualifies for 80C rebate but the interest is compounded annually and is taxable)
  7. Five-year bank fixed deposits. (Term deposit with a tenure of 5 years in a scheduled bank.)
  8. 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.

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.

Tax savings through Health Insurance
Persons coveredExemption LimitPreventive Health Check Up
Exemption
Total Benefit
Self and familyRs. 25,000Rs. 5000Rs. 25,000
Self & Family + Parents(25,000+ 25,000)
= Rs. 50,000
Rs. 5000Rs. 50,000
Self & Family + Senior Citizen Parents(25,000+ 50,000)
= Rs. 75,000
Rs. 5000Rs. 75,000
Self (Senior Citizen) & Family + Senior Citizen Parents(50,000+ 50,000)
= Rs. 1,00,000
Rs. 5000Rs. 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.

Expense on disabled person section 80DD
Disability PercentageDeduction Amount
Disability less than 40%Nil
more than 40% to less than 80%Rs. 75,000
80% or moreRs. 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 NoDiseaseMore
1Neurological DiseasesDementia
Dystonia
Musculorum Deformans
Motor Neuron Disease
Ataxia
Chorea
Hemiballismus
Aphasia
Parkinsons Disease
2Malignant Cancers
3Acquired Immuno-Deficiency Syndrome (AIDS)
4Chronic Renal failure
5Hematological disordersHemophilia
Thalassemia
Medical Expenses
Age group of the person undergoing treatmentDeduction Limit
Up to 60 years of ageRs. 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

Save Tax on income tax

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 GovernmentNational Children's Fund
Prime Minister's National Relief FundChief Minister's Relief Fund or Lieutenant Governor's Relief Fund with respect to any State or Union Territory
National Foundation for Communal HarmonyThe 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 eminenceThe 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 districtChief Minister's Earthquake Relief Fund, Maharashtra
Fund set up by a State Government for the medical relief to the poorAny fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
National Illness Assistance FundAny 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 CouncilPrime Minister's Armenia Earthquake Relief Fund
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple DisabilitiesAfrica (Public Contributions India) Fund
National Sports FundSwachh Bharat Kosh (applicable from FY 2014-15)
National Cultural FundClean Ganga Fund (applicable from FY 2014-15)
Fund for Technology Development and ApplicationNational Fund for Control of Drug Abuse (applicable from FY 2015-16)

Donations eligible for 50% deduction (Without qualifying limit)

Jawaharlal Nehru Memorial FundIndira Gandhi Memorial Trust
Prime Minister's Drought Relief FundRajiv 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
tax savings - HRA income tax exemption

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

SectionDescriptionLimit
80CPF, Insurance Premium, Home loan principal etc.1,50,000
80CCD(1)National Pension Scheme (NPS)50,000
80DHealth Insurance25,000 - 1,00,000
80DDMedical Expense - Disabled person75,000 or 1,25,000
80DDBMedical Expense - Specified diseases40,000 - 1,00,000
80EInterest on Educational LoanNo Limit
24Interest portion of home loan EMIMaximum 2,00,000
80TTAInterest on savings bank account10,000
80GDonations100% or 50%
10 (13A)House Rent Allowance (HRA)Lower of (HRA / 50% salary / Excess of Rent over 10% annual salary)
80GGHouse 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

  1. Standard deduction from salary: Rs 50,000 from FY 2019-20.
  2. 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 IncomeTax payable before cessRebate u/s 87ATax payable + 4% Cess
2,70,0001,0001,0000
3,60,0003,0003,0000
4,90,00012,00012,0000
5,00,00012,50012,5000
5,50,00022,500Nil23,400

Conditions:

  1. You must be a resident individual and
  2. Total income after deduction should not exceed Rs 5,00,000
  3. 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
IncomeUp to 59 years of age60 to 79 years of ageAge 80 and above
0 - 2.5 lakhsNilNilNil
2.5 - 3 lakhs5% of income above 2.5 lakhsNilNil
3 - 5 lakhs2500 + 5% of income above 3 lakhs5% of Income above 3 lakhsNil
5 - 10 lakhs12500 + 20% of income above 5 lakhs10000 + 20% of income above 5 lakhs20% of income above 5 lakhs
Above 10 lakh112500 + 30% of income above 10 lakhs110000 + 30% of income above 10 lakhs100000 + 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

Section 10 - Income exempt from tax

Section 10(1) - Income earned through agricultural meansSection 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 HUFSection 10(23BBB) - Income received by the European Economic Community
Section 10(2A) - Income received by partners of a firm, as shared between themSection 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 IndianSection 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 IndianSection 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 originSection 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 IndiaSection 10(23D) - Income earned via Mutual Funds
Section 10(6) - Any income earned or received by a non-Indian citizenSection 10(23DA)j - Income earned via a Securitisation Trust
Section 10(6A), (6B), (6BB), (6C) - Government tax paid on the income of a foreign firmSection 10(23EA) - Income earned through an IPF
Section 10(7) - Allowances received by government employees stationed abroadSection 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 ProgramSection 10(23ED) - Income exemption of IPF
Section 10(8A) - Income earned by a consultantSection 10(23DFB) - Income exemption of specified income received by Venture Capital Firms, Funds or Businesses
Section 10(8B) - Income earned by a consultant’s staff or employeesSection 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 ProgramSection 10(25) - Income earned via provident funds and superannuation funds
Section 10(10) - GratuitySection 10(25A) - Income earned via Employee’s State Insurance Fund
Section 10(10A) - The commuted value of the pension earned by an individualSection 10(26), 10(26A) - Income earned by Schedule Tribe Members
Section 10(10AA) - Any amount earned via encashment of leave at the time of retirementSection 10(26AAN) - Income earned by an individual of Sikkimese origin
Section 10(10B) - Compensation paid to workers due to relocationSection 10(26AAB) - Marketing regulation with regards to agricultural produce
Section 10(10BB) - Any remittance obtained as per the Bhopal Gas Leak Disaster Act 1985Section 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 disasterSection 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 firmSection 10(26BBB) - Income earned by corporations established for former servicemen
Section 10(10CC) - Any income received through taxation on perquisitesSection 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 policySection 10(29A) - Income received by Community Boards
Section 10(11) - Any payment received via the Statutory Provident FundSection 10(30) - Income earned in the form of subsidies via the Tea Board
Section 10(12) - Any payment received via a recognised or authorised FundSection 10(31) - Income earned in the form of subsidies via the concerned Board
Section 10(13) - Any payment received through a Superannuation FundSection 10(32) - Income earned by a child in accordance with Section 64 of the Income Tax Act
Section 10(13A) - House Rent AllowanceSection 10(33) - Income earned through Unit Trust of India capital asset transfer
Section 10(14) - Allowances utilised to meet business expensesSection 10(34) - Income earned in the form of dividends through an Indian firm
Section 10(15) - Income received in the form of interestSection 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 governmentSection 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 scholarshipSection 10(35A) - Income from a securitisation trust that is exempt
Section 10(17) - Allowances granted to MLCs, MLAs or MPsSection 10(36) - Income received on the sale of shares under specific conditions
Section 10(17A) - Income received in the form of a government awardSection 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 heroismSection 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 pensionSection 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-rulerSection 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 authoritySection 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 researchSection 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 agencySection 10(43) - Any income in relation to reversal of mortgage
Section 10(23A) - Income earned by certain Professional InstitutesSection 10(44) - Income generated through the NPS Trust
Section 10(23AA) - Income acquired through Regimental FundSection 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 fundSection 10(46) - Any income that comes under the category of ‘specified income’ with regards to specific authoritative bodies
Section 10(23MB) - Insurance pension fund incomeSection 10(47) - Any income that is exempt under the category of infrastructure debt fund
Section 10(23B) - Income earned by village industry development institutionsSection 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 BoardSection 10(49) - Any income earned by the NFHC (National Finance Holdings Company)

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