Sections under the Income Tax Act that can maximise your tax savings

Section 80C of the Income Tax Act allows tax deductions of up to Rs. 1.5 lakh in a given financial year. Apart from this, Sections 24, 80D, 80E, 80G, and 80U also facilitate tax savings for various expenses incurred by taxpayers.

Income tax deductions

An old proverb says, “A penny saved is a penny earned”. It means that while it is important to focus on earning more money, it’s equally crucial to save the money that you already have. That is why you must emphasise tax savings while preparing your financial plan for a year. The Government of India allows tax deductions for various investments, savings, and expenses under different sections of the Income Tax Act of 1961. Let's take a look at these.

Tax deductions available under the Income Tax Act

Below are the particular sections under the IT Act that facilitate tax savings:

1. Section 80C

Section 80C is among the most popular sections of the Income Tax Act. It allows tax deductions of up to Rs. 1.5 lakh every financial year for investments made in certain long-term savings instruments, including:

Also Read: SCSS Or PPF Or SSY: Which Savings Scheme Is The Best For You?

2. Section 80D

Section 80D of the Income Tax Act allows tax deductions of up to Rs. 25,000 for medical insurance premiums paid by the taxpayer for themself, their spouse, and dependent children. If they are paying health insurance premiums for their parents, the maximum tax deduction limit goes up to Rs. 50,000. An additional tax deduction of up to Rs. 5000 per year towards preventive check-ups is also allowed within this limit. In case a taxpayer happens to be a senior citizen, the maximum tax deduction allowed under Section 80D goes up to Rs. 1 lakh.

3. Section 24

If you have taken a home loan, you can claim the interest amount that you’re paying for it as tax deductions under Section 24 of the Income Tax Act. The maximum tax saving allowed under this section is Rs. 2 lakh in a financial year. Additionally, if you’re a first-time homebuyer, you can claim an additional tax deduction of Rs. 50,000 for paying home loan interest over and above the limit of Section 24.

4. Section 80E

Under Section 80E of the Income Tax Act, interest paid by the taxpayer towards an education loan for himself/herself or his/her relatives (spouse and children) is available for a tax deduction. There is no limit on the maximum tax savings that can be claimed under this section.

5. Section 80G

Section 80G of the Income Tax Act allows tax deductions for donations made by the taxpayer to approved charitable institutions. Again, there is no limit on the maximum tax savings that can be claimed under this section.

Also Read: A Girl's Guide To Funding Her Higher Education

Impact of tax-saving investments on investors

As an investor, you can include tax-saving investments in your financial planning. They will not only help you reduce your income tax outgo but also allow you to achieve your long-term financial goals. But remember that tax deductions mentioned above are available only if you opt for the old tax regime. If your annual income is within Rs. 7.5 lakh, you can opt for the new tax regime and pay zero tax.

Sources

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