Common Tax Deductions You Need To Know For Smarter Financial Planning

• PPF, EPF, ELSS, NSC, life insurance, higher education, and home loans are common investments with tax benefits

• Some other major deductions where you can save taxes are on home purchases, rent, medical expenses related to disabilities, etc. 

• Additional tips on how you can maximise your tax savings by investing and spending money 

Tax deductions are a crucial aspect of personal finance in India, allowing you to reduce your taxable income and save money. Understanding these deductions is essential to optimise your tax outgo and make informed financial decisions. Let’s take a look into some of the most common claimable expenses for income tax. 

To begin with, all salaried individuals and pensioners can avail of a flat deduction of ₹50,000 from their gross salary income. It’s one of the few claimable deductions without receipts. Read on for other major deductions.

Section 80C is a popular tax-saving provision that allows you to deduct a maximum of ₹1,50,000 from your taxable income for investments in various schemes and eligible expenditures. It covers some of the most typical income tax deductions, such as:

• Public Provident Fund (PPF): A long-term, low-risk savings scheme with guaranteed returns.

• Employee Provident Fund (EPF): A retirement savings scheme for salaried employees.

• Equity-Linked Savings Scheme (ELSS): A type of mutual fund that invests in equities and offers tax benefits.

• National Savings Certificates (NSC): A fixed-income savings scheme with a lock-in period of 5 years.

• Payments of premiums towards life insurance policies for yourself, your spouse, or children.

• Payments towards tuition fees for children's education.

• Repayment of the principal amount of a home loan.

You can claim a deduction of up to ₹25,000 for health insurance premiums paid for yourself, your spouse and dependent children. An additional ₹25,000 can be claimed for premiums paid for parents and ₹50,000 if they are senior citizens. This is available under Section 80D.

Section 80E provides a deduction for the interest paid on an education loan taken for oneself, spouse, children, or a student for whom the individual is the legal guardian. The entire interest on education loans for higher education in India or abroad can be claimed as a deduction. There is no limit on the amount of interest that can be claimed, but it is available for a maximum of 8 years starting from the year you begin repayment.

Donations to specified funds and institutions like the Prime Minister's Relief Fund, eligible NGOs and political parties can fetch you deductions under Section 80G. Ensure you get a receipt and the institution’s PAN for claiming the deduction. The amount of deduction can be either 50% or 100% of the donation amount, depending on the charity.

You can claim up to ₹10,000 under Section 80TTA for interest earned on your savings bank account. Senior citizens can claim up to ₹50,000 under Section 80TTB for interest earned on savings accounts, fixed deposits, or recurring deposits.

You can claim a deduction for interest paid on a home loan under Section 24(b). For a self-occupied house, you can claim a deduction of up to ₹2 lakh on interest paid. For a let-out property, the entire interest paid is deductible after adjusting rental income. This helps significantly in reducing your taxable income if you have a home loan. 

In addition to the above, there are several other claimable deductions available for specific expenses and investments, such as:

1. For First-time Homebuyers: You can avail an additional deduction of ₹50,000 on interest paid if the loan amount is ₹35 lakh or less and the property value is ₹50 lakh or less, under section 80EE. For affordable housing, an additional deduction of ₹1.5 lakh on interest paid is available under Section 80EEA if the stamp duty value of the property is up to ₹45 lakh.

2. Electric Vehicle Loan: Interest paid on the loan for the purchase of an electric vehicle is deductible under Section 80EEB.

3. Maintenance of Disabled Dependents: Deduction for expenses incurred on medical treatment, training, and rehabilitation of disabled dependents under Section 80DD. The amount is ₹75,000 for regular disability and ₹1.25 lakh for severe disability.

4. Medical Expenses Deductions: Deduction for medical expenses incurred for self or dependent family members, up to ₹40,000 for individuals and ₹1 lakh for senior citizens. This can be claimed under Section 80DDB.

5. Housing Rental: If you do not receive a housing rental allowance but pay rent, you can claim a deduction under section 80GG. You can claim a deduction of either ₹5,000 per month or 25% of your total income or the actual rent paid minus 10% of your total salary. The deduction that you can claim is the least among these.

6. Infrastructure Bonds: Investment in notified infrastructure bonds can be claimed up to ₹20,000 under Section 80CCF.

7. Disability: Individuals with disabilities can claim ₹75,000 for regular disability and ₹1,25,000 for severe disability under Section 80U. The disability certificate should be from a recognised medical authority.

8. National Pension System (NPS): Employer’s contribution to your NPS account up to 10% of salary (basic + DA) is deductible from your taxable income. This exemption under Section 80CCD is over and above the limit of ₹1.5 lakh under Section 80C.

9. Interest on Savings Account: Under Section 10(15), interest earned on specific types of savings, such as Post Office Savings Accounts, is exempt up to ₹3,500 for an individual and ₹7,000 for a joint account.

10. Agricultural Income: Income from agriculture is fully exempt from tax. However, it is taken into account for determining the tax rate on non-agricultural income.

• Keep accurate records: To claim deductions, keep track of all of your investments and expense-related receipts, certifications, and other paperwork.

• Pay your taxes on time: To avoid fines, make sure you submit your income tax return by the deadline.

• Speak with a tax professional: Speak with an experienced tax advisor if you have complicated tax questions or require individual advice.

• There are two income tax regimes in India: the old and the new. To decide which one will benefit you more in terms of tax liabilities and deductions, compare the two. 

You can optimise your financial planning and greatly reduce your tax burden by being aware of and taking advantage of these claimable expenses for income tax deductions. Keeping accurate records and receipts for all of your deductions is crucial. 

1. What are claimable tax expenses for income tax?

The government allows tax deductions under various sections of the Income Tax Act. The list of sections to claim tax expenses for income tax are Section 80 and its subsection, Section 24(B) and Section 10(14). 

2. How can I claim medical expenses on my income tax return?

Under Section 80D you can claim tax benefits on your medical insurance. To claim it, you can submit your medical bill or insurance premium receipts to your employer. You can also claim it while you are filing your Income Tax Return. 

3. What are the most common income tax deductions?

The most common deduction policyholders claim for are:

• Personal deductions

• Charitable contributions

• Education expenses

• Medical insurance premium

• Personal allowances

• Business Expenses

4. Can I claim deductions without receipts?

Yes, you can still claim an exception if you don't have receipts. For normal expenses, you'll need to show all alternative records, which will show the transaction date, amount and purpose.

5. How much mortgage interest is claimable for tax purposes?

You can claim up to ₹2 lakh per annum on a self-occupied property. For a let-out property, there is no upper limit. 

6. Are there any typical deductions I can claim without receipts?

A salaried individual can claim a House Rent Allowance even if he/she doesn't have receipts for it. But you need to submit rent receipts or any payment you made related to the rent. 

7. Can educational expenses be claimed as tax deductions?

Section 80E of the Income Tax Act, 1961, will allow you to claim a deduction of the education loan. The loan can be from any financial and charitable institution. However, the deduction under Section 80E is only available if you follow the old regime.

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