Section 80C is the traditional tax deduction section which is popularly availed by tax payers to avail tax deduction. Under this section, investments up to a certain limit in life insurance, mutual funds, fixed deposits reduce your taxable income. However, some higher tax deduction options have been introduced recently, which you must use to take benefit of higher tax deduction and manage your tax planning efficiently.
Sec80TTA – Interest on Savings Bank Account
Under this section, you can avail tax deduction of up to Rs. 10,000 per financial year, on the interest you earn from your savings bank account. A family of four can have up to Rs. 40,000 tax-free income per year just from savings bank account interest!
Sec80D – Medical Insurance Premium
In this section, along with deduction for yourself and spouse, you also get tax deduction for premium paid for your parent’s medical insurance. If your parents are senior citizens, you can claim deduction of up to Rs. 75,000 per financial year.
Sec80E – Interest on Education Loan
If you have availed an education loan for yourself, your spouse, your children or for someone whose legal guardian you are, for studying any course after Senior Secondary Examination or its equivalent, you can avail tax deduction on the interest you are paying on the loan. This deduction is without any limit, i.e. you can claim tax deduction on the entire amount without any limit! However, you can claim this deduction only for a period of 8 years, from the time you start paying interest.
Now that you know of the new tax deduction options, it is important that you wisely invest the money saved from paying taxes. You can invest this money in investments like mutual funds where your money will grow at a higher rate compared to regular investment options like savings bank accounts and fixed deposits. Remember, your tax savings in your bonus income and should be invested prudently so that it beats inflation and gives you returns.