Let’s be honest, if given a choice, none of us would like to pay tax on the income we earn. But we have to and we should, because income tax is an important source of revenue for the government. This revenue is used by the government to build the nation. India is a developing nation and very few Indians earn an income that can be taxed. This is why if you’re one of those who earn a taxable income, you should proudly and honestly pay income tax.
But having said that, there are certain ways by which you can legally reduce your taxable income that you should make use of. The government allows for certain tax-saving deductions that you can use to lower your taxable income. You can effectively use these deductions to pay less tax. The following table lists common tax-saving deductions and their limits.
Investment in PPF
Employee’s share of PF contribution
Life Insurance Premium payment
Children’s Tuition Fee
Principal Repayment of home loan
Investment in Sukanya Samridhi Account
Sum paid to purchase deferred annuity
Five-year deposit scheme
Senior Citizens savings scheme
Subscription to notified securities/notified deposits scheme
Contribution to notified Pension Fund set up by Mutual Fund or UTI
Subscription to Home Loan Account Scheme of the National Housing Bank
Subscription to deposit scheme of a public sector or company engaged in providing housing finance
Contribution to notified annuity Plan of LIC
Subscription to equity shares/ debentures of an approved eligible issue
Subscription to notified bonds of NABARD
Additional contribution to NPS
Interest Income from Savings account
Maximum up to 10,000
For rent paid when HRA is not received from employer
Least of rent paid minus 10% of total income Rs. 5000/- per month 25% of total income
Interest on education loan
Interest paid for a period of 8 years
Interest on home loan for first-time homeowners
Medical Insurance – Self, spouse, children
Medical Insurance – Parents more than 60 years old
Medical treatment for handicapped dependant or payment to specified scheme for maintenance of handicapped dependant
Disability is 40% or more but less than 80%
Disability is 80% or more
Medical Expenditure on Self or Dependent Relative for diseases specified in Rule 11DD
For less than 60 years old
For more than 60 years old
For more than 80 years old
Lower of Rs 40,000 or the amount actually paid
Lower of Rs 60,000 or the amount actually paid
Lower of Rs 80,000 or the amount actually paid
All of these deductions are popularly known as Section 80 deductions. A taxpayer can claim the deductions that are applicable to him or her.
Apart from these, there are some other uncommon deductions also available to taxpayers. These include deductions for donations made to political parties, treatment for taxpayer suffering from physical disabilities, donations made towards social causes, etc.
These deductions have to be claimed at the time of filing income tax returns. The taxpayer is not required to attach or submit the documents related to the claimed deductions with their tax returns, but the documentation should be kept handy in case it is required by the tax department at a later date.