As an earning individual, you are required to pay taxes. It is not limited to your salary alone, but also on your investments. This tax is used towards the development of the nation and the services that are provided to you as a citizen of India. However, there are certain products and services that allow you to claim tax deductions. You can save money with the help of these tax deductions. If you wish to know where you can claim tax deduction and under which income tax slab, continue reading.
What is tax deduction?
Tax deduction signifies the deduction in the amount of tax that you pay for your investments or assets This is different from tax exemption wherein you are completely exempted from tax payment. Tax deduction allows you to pay reduced tax. Using the income tax calculator can give you an idea about the tax deduction you can enjoy on your investments.
Where to claim tax deduction? below are products and services where you can claim tax deductions:
- Public Provident Fund (PPF)
Investing a part of your income to a PPF account allows you to enjoy tax deduction under Section 80C of the Income Tax Act.
- Life Insurance
You can get income tax deduction for paying premium towards your life insurance policy under section 80C. The amount received on maturity of the policy is also tax deductible under Section 10(10D). Do read the policy document carefully to get an idea about the tax deductions offered in your policy.
- National Saving Certificate (NSC)
When you invest in NSC, your invested amount is eligible for tax deduction under section 80C. NSCs are one of the most secured ways of investing your money in India. Do keep in mind the interest earned from NSC is taxable. Due to its cumulative nature, interest is reinvested and qualifies for tax deduction.
- Fixed Deposits (FDs)
When you invest in a fixed deposit, it is advised that you stay invested in it for a minimum period of 5 years to enjoy the benefits of tax deduction. This deduction is offered under Section 80C. Tax savings on fixed deposits are offered by multiple banks in India. The accumulated interest, however, is subject to tax.
- Unit-linked Insurance Plans (ULIP)
Investing in ULIPs allow you to get tax deductions under Section 80C. The maturity benefits, death benefit and partial withdrawal are also eligible for deduction under Section 10(10D). Do keep in mind these deductions are subject to tax provisions.
- Tuition Fees
Your children’s tuition fees qualify for income tax deduction under section 80C. However, the tax deduction can be enjoyed only on fees that are paid for full-time education in an Indian university, college and school. This is limited to two children. Donations or development fee towards education institutions are included under this deduction.
- Medical Insurance
Health insurance premium is eligible for income tax deduction under section 80D of the Income Tax Act. Tax deduction of up to Rs. 25,000 for youngsters and Rs. 30,000 for senior citizens is offered under this insurance.
- Charitable Contribution
Under Section 80G of the income tax act, donations made to NGOs and other charitable organisations are eligible for tax deductions.
- Treatment of Disabled Dependents
If you happen to have any disabled dependents who rely on your income for treatment, their medical costs are subjected to tax deductions under section 80DD of the Income Tax Act.
- Education Loan Interest
If you have an outstanding education loan, the interest paid for it is eligible for tax deduction under section 80E of the Income Tax Act.
- House Rent Allowance (HRA)
As an employee, you can get income tax deduction for the house rent paid. If you are living in a rented accommodation, you can get tax deduction on the rent that you pay for the accommodation. This deduction is usually applicable for salaried employees under section 80GG of the Income Tax Act.
Conclusion
These are some of the products and services that allow you to enjoy tax deduction. You can visit your nearest tax advisor to get information about where else you can claim tax deductions. You can also get information about the different types of ITR and the ones you fall under as a salaried individual.