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We are all familiar with the fact that investing in tax-saving avenues such as life insurance, NPS, PPF, ELSS, Sukanya Samriddhi Scheme, NSC, among others, is necessary to save tax. However, not many of us are aware of the different tax provisions that can help us reduce our tax liability without making any investments.
According to tax experts, there are several provisions in the Income Tax Act, 1961, that allow individuals to save tax on expenses incurred by them, even if they have not made any specific investments for tax-saving purposes. One such option is to claim a deduction under Section 80C of the Income Tax Act, where a maximum deduction of up to Rs 1,50,000 can be claimed in a financial year. The following expenses are eligible for deduction under Section 80C under the old tax regime:
1. Tuition Fees for Children
The Income Tax Act allows for a deduction for tuition fees paid to any university, college, school, or other educational institution located in India up to Rs 150,000. This deduction is available for the full-time education of up to two children of the individual. However, payments made towards development fees, donations, or similar expenses are not covered under this deduction. Additionally, tax authorities have clarified that full-time education includes play-school activities, pre-nursery, and nursery classes.
In addition to Section 80C, there are several other options available for saving taxes on expenses. Here are a few examples:
2. Donation
Donating to charitable organizations is a common way for individuals to contribute to society and help those in need. Under Section 80G of the I-T Act, individuals can claim a deduction for donations made to approved organizations. The deduction can be either 50% or 100% of the donation, depending on the specified conditions. To claim the deduction, individuals must provide details such as the name, PAN, and address of the recipient, as well as the donation amount, when filing their tax return.
3. Medical Insurance Premiums
Under Section 80D of the Income Tax Act, individuals can claim a deduction for the premiums paid towards medical insurance policies for themselves, their spouse, children, and parents. The maximum deduction limit varies based on the age of the insured individuals and the type of policy. For example, an individual can claim up to Rs 25,000 per annum in respect of medical insurance premium paid for himself and his family (none of them being senior citizens). Moreover, senior citizens can avail a higher deduction of up to Rs 50,000.
4. Home Loan Interest & Principal Amount
Section 24(b) of the Income Tax Act allows individuals to claim a deduction for the interest paid on home loans. The maximum deduction limit is Rs 2 lakh per financial year for self-occupied properties. You can also claim a deduction for repayment of the principal component under Section 80C. Taxpayers can get this benefit for the self occupied property under the old tax regime only.
5. Interest on education loan
According to Section 80E, individuals can avail a deduction for the interest paid on education loans taken for the purpose of pursuing higher education for themselves or their relatives. This deduction is subject to the conditions mentioned in the section. The deduction can be claimed without any limit for a period of 8 years, starting from the year in which the individual begins repaying the loan and continuing for the next seven years or until the interest on the loan is fully paid, whichever occurs earlier.
6. Rent Paid
Individuals who do not own a house but live in a rented accommodation can claim a deduction for the rent paid under Section 10 of the Income Tax Act. The maximum deduction limit is determined based on the individual’s salary and the city of residence.
These are just a few examples of the various provisions in the Income Tax Act that can help individuals reduce their tax liability without making any additional investments. It is, however, advisable to consult a tax expert or financial advisor to understand the specific provisions applicable to your situation.
