Income Tax: 10 Deductions available without making an investment
Individuals must invest money in some financial products that provide tax benefits under Section 80C of the Income Tax Act. Individuals who live paycheck to paycheck may or may not have the necessary funds to invest. As a result, they may be unable to take advantage of the tax advantages associated with these financial products.
However, there must be certain investments/payments that many people make regardless of whether they provide tax benefits or not. In this article, we will go over how you can get tax breaks on ten different types of investments/payments that you may already be making.
Contribution to the EPF
In the case of most salaried individuals, a portion of their pay is set aside for Employee Provident Fund (EPF) contributions. It allows you to build a retirement fund while also receiving tax benefits. Section 80C of the Income Tax Act allows for the deduction of EPF contributions from taxable income. In a fiscal year, the maximum deduction is the amount contributed or Rs. 1,50,000, whichever is less.
Children's tuition has been paid.
The tuition fee you pay for your child is deductible from taxable income under Section 80C of the Income Tax Act. The deduction applies to tuition fees paid to any school, college, university, or other educational institution in India for full-time education. The deduction is available for any two children's tuition fees.
The tuition fee paid or Rs. 1,50,000, whichever is less, is the maximum deduction allowed in a fiscal year. Please keep in mind that you cannot deduct any amount paid for development fees, donations, or similar payments.
Principal repayment on a mortgage
If you obtained a home loan to purchase or construct a residential property, you will be required to pay the home loan EMI. You can deduct both the principal and interest portion of the EMI from your taxable income.
The principal portion of the home loan EMI is deductible from taxable income under Section 80C of the Income Tax Act. In a fiscal year, the maximum deduction is the principal amount paid or Rs. 1,50,000, whichever is less.
Stamp duty and registration fees for residential property purchases
The amount paid for stamp duty and registration fees when purchasing a residential property is deductible from taxable income. Section 80C of the Income Tax Act allows for the deduction. In a fiscal year, the maximum deduction is the amount paid or Rs. 1,50,000, whichever is less.
Interest on a mortgage
Section 24 of the Income Tax Act allows for the deduction of home loan interest from taxable income. In a fiscal year, the maximum deduction is the amount paid or Rs. 2 lakhs, whichever is less.
A higher education loan's interest
Many people take out education loans to further their education. The interest paid on a student loan is deductible from taxable income under Section 80E. The loan for higher education should have come from any financial institution or approved charitable institution. An individual can obtain a loan for themselves or a relative. A relative can be the individual's spouse, children, or a student over whom the individual has legal custody.
The entire amount of interest paid in a fiscal year is deductible, with no cap. The deduction is available until the loan term expires or for 8 years, whichever comes first. Higher education is defined in Section 80E as any course pursued after passing the Senior Secondary Examination (SSE) or its equivalent from any Government-recognized school, board, or university.
Loan interest on an electric vehicle
Electric vehicles (EVs) have grown in popularity in recent years due to their environmental friendliness and fuel efficiency. However, because the initial cost of purchasing an EV is higher than that of an ICE-engine vehicle, many people finance it. The interest paid on a loan used to buy an electric vehicle is deductible from taxable income under Section 80 EEB.
The maximum deduction allowed in a fiscal year is the interest paid or Rs. 1,50,000, whichever is less. The loan should have been approved between April 1, 2019 and March 31, 2023.
Amount paid for a preventive health examination
Many people nowadays go for preventive health check-ups for themselves and their family members on a semi-annual or annual basis. The cost of a preventive health check-up is deductible from taxable income under Section 80D.
The maximum deduction for a preventive health check-up in a fiscal year is the amount paid or Rs. 5,000, whichever is less. The deduction is part of the overall deduction allowed under Section 80D of Rs. 25,000 (Rs. 50,000 for senior citizens). The money can be used to pay for a preventive health check-up for yourself and your family. Spouses and dependent children are considered family.
Your employer's NPS contribution
Section 80CCD allows you to deduct from your taxable income the amount contributed by your employer to your NPS account (2). The following is the maximum amount that can be deducted:
A government (central or state) employee's NPS account can be funded with up to 14% of their salary.
Contribution of up to 10% of salary to any other employee's NPS account.
A savings account earns interest.
You must keep a savings account for a variety of reasons, including receiving a salary, business income, any other income (dividend, rent, etc.), building and maintaining an emergency fund, and so on. Section 80TTA allows a savings account's interest to be deducted from taxable income. In a fiscal year, the maximum deduction is the interest earned or Rs. 10,000, whichever is less.
Note: The total deduction available for all products covered by Section 80C in a fiscal year is Rs. 1,50,000. In this article, we discussed Section 80C products such as EPF, tuition paid for children, home loan principal repayment, stamp duty and registration fee for residential property purchase, and so on. Other well-known Section 80C products include PPF, ELSS, NSC, life insurance, SCSS, 5-year tax-saving fixed deposit, and so on. As a result, the maximum deduction available in a fiscal year for all Section 80C products is Rs. 1,50,000.
Tax breaks for specific investments/payments
In this article, we discussed ten investments/payments that you will make regardless. However, you can deduct these expenses from your taxable income. Let us sum them up:
Product
Income Tax Act Section Maximum deduction allowed in a fiscal year
Contribution to the EPF
Rs. 1,50,000 under Section 80C
Children's tuition has been paid.
Rs. 1,50,000 under Section 80C
Principal repayment on a mortgage
Rs. 1,50,000 under Section 80C
Stamp duty and registration fee for Section 80C residential property purchase Rs. 1,50,000
Interest on a mortgage
Section 24 – Rs. 2,000,000
A higher education loan's interest
Section 80E Total amount of interest paid in a fiscal year
Loan interest on an electric vehicle Rs. 1,50,000 under Section 80 EEB
Amount paid for a preventive health examination
80D Section
Employer contributes Rs. 5,000 to NPS
Article 80CCD (2)
14% of a government employee's salary and 10% of any other employee's salary
Section 80TTA interest on savings account Rs. 10,000
You can deduct these investments/payments from your taxable income under various sections of the Income Tax Act. As a result, even if you are restricted from making new investments under Section 80C, you can still benefit from tax breaks.
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