How to plan your tax-saving investments for the year

The best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year, resulting in hurried decisions. Instead, if you plan at the start of the year, your investments can compound and help you achieve long-term goals.

The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act. Section 80C includes various investments and expenses you can claim deductions on up to the limit of Rs. 1.5 lakh in a financial year. Your Money is locked-in for 3 years which is Unique to Mutual Fund Tax Saving Solutions.

Apart from the 80C deductions, there are various deductions under Section 80 you can use to save on income tax. Tax benefits on health insurance premiums and home loan interest are a few.

  • Buy Medical Insurance & claim a deduction up to Rs. 25,000 (Rs 50,000 for Senior Citizens) for medical insurance premium
  • Claim deduction upto Rs 50,000 on home loan interest under Section 80EE
  • A home loan would also help you in reducing your taxable income as the principal portion of home loan can be claimed under Section 80C upto Rs 1.5 lakh and the interest portion can be claimed as a deduction from income from house property

If you are a salaried employee then you can enjoy the tax-saving benefits of House Rent Allowance, which might be a component of your salary. If you are living in a rented home you can claim HRA exemption from your salary income. The maximum exemption which is available is lower of the following -

Actual amount of HRA received

50% of your salary if you live in a metro city or 40% if you are in a non-metro city

Rent paid 10% of annual salary

Use the following pointers to plan your tax-saving for the year:

  • Check the tax-saving expenses you already have like insurance premiums, childrens tuition fees, EPF contribution, home loan repayment etc.
  • Deduct this amount from Rs 1.5 lakh to figure out how much to invest. You neednt invest the entire amount, if expenses are covering the limit.
  • Choose tax-saving investments based on your goals and risk profile. ELSS funds, PPF, NPS and fixed deposits are some of the popular options.

Here is a complete list of tax-free deductions available under Section 80 apart from Section 80C:

SectionsWhat they deal inExemption limit
80DHealth insurance premiums

Up to ₹60,000

( Premium paid for health insurance for self-spouse-child- ₹25,000 Senior citizen parents or self –₹30,000)

80DD Expenses on a handicapped dependent

Disability up to 80% - ₹75,000 (fixed)

Severe disabilities – ₹1.25 lakhs (fixed)

80DDBTreatment of specified illnesses

Age up to 60 years – up to ₹40,000

Age 60-80 years – up to ₹60,000

Age above 80 years – up to ₹80,000

80EEducation loan interest paymentNil. Actual interest paid
80EEHome loan interest payment for first time home-ownersUp to ₹50,000
80GDonations to approved charitable institutes50% or 100% of the amount donated
80GGRent paid by employees not having HRA

Lower of the following –

· 25% of total income

· ₹5000/month

· Rent paid exceeding 10% of total income

80GGB and 80GGCContributions made to a political party by companies and individuals respectivelyNil. 100% actual contribution made only by other than cash.
80TTASaving account interest₹ 10,000
80UHandicapped tax-payers can claim this deduction₹75,000 (fixed). For severe disabilities ₹1.25 lakhs (fixed)
80RRBRoyalty or patent incomeUp to ₹3 lakhs