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Tax

Check these 7 tax-savers before you invest again

​Tax-saving sections under the Income-Tax ActThinkStock Photos
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​Tax-saving sections under the Income-Tax Act
Of the many tax saving avenues, the most popular are the tax benefits under Section 80C of the Income-tax Act. Sections 80D and 24 also come in handy.

Now, before you start looking for tax saving investments under Section 80C, do a small exercise to determine how much you have already committed towards it. Here's how you may not have to make additional tax saving investment under Section 80C.
1. EPF: InvoluntaryThinkStock Photos
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1. EPF: Involuntary
An employee contributes 12% of basic pay towards the EPF, which qualifies for tax benefit under Section 80C. The employer needs to match the employee's minimum contribution of 12% of the basic pay but the employee is not entitled to take tax benefit on it. Currently, (2017-18) contributions and the balance earn 8.55% tax free interest. Of the employer's contribution, 8.33% (on a maximum salary of Rs 15,000, i.e., Rs 1,250) is diverted towards EPS and the balance 3.67% moves into the employee's PF account each month. Check your (employee's) total contributions for the year (assuming basic remains same) and count it towards Section 80C benefit.
​2. Life insurance premium: Existing or new commitmentThinkStock Photos
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​2. Life insurance premium: Existing or new commitment
If you already have life insurance, keep it active by paying renewal premiums. Renewal premiums also qualify for tax benefit under Section 80C. If your policy lapses, revive it by paying unpaid premiums, only if the policy is worth it. You would be eligible to claim tax benefit under Section 80C on the entire premium paid (including the previous unpaid premiums) subject to the limit of Rs 1.5 lakh. All life insurance plans, including pure term insurance, endowment, Ulips and money-back plans qualify for this benefit.
3. Home loan principal repayment: Outflow​ThinkStock Photos
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3. Home loan principal repayment: Outflow​
If you have a home loan, the principal repaid qualifies for tax benefit under Section 80C. The EMI of the home loan constitutes both principal and interest. You may ask your home loan lender to issue a statement showing the provisional break-up of principal, interest for the entire year. Even partial or full principal repayment made during the year qualifies for tax benefit.
​4. Home loan interest payment: OutflowThinkStock Photos
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​4. Home loan interest payment: Outflow
The interest component in the EMI can be claimed as deduction from "income from house and property" under Section 24. The maximum tax deduction allowed under this section is Rs 2 lakh for self-occupied property for which the loan is taken. If the construction is still on, the benefit is delayed. After possession, provided it happens within five years, the pre-construction (pre-completion) interest can be claimed from the year when the construction is complete and after getting possession, in five equal instalments.
5. Tuition fees: OutflowGetty Images
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5. Tuition fees: Outflow
Parents can claim a deduction for tuition fees for a maximum of two children within the maximum limit of Rs 1.5 lakh under Section 80C. However, any payment towards any development or donation to institutions is excluded. When both spouses are taxpayers, deduction for tuition fees can be claimed by the parent who made the payment. Say, if A made the payment for his daughter's school fees of Rs 1.7 lakh, he can claim Rs 1.5 lakh in his return under Section 80C. The remaining Rs 20,000 cannot be claimed by his wife. If A has another child, A can pay for child 1 and his wife can pay for child 2. This way, the payment can be claimed separately by both in their tax returns.
​6. Health insurance: A must-haveGetty Images
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​6. Health insurance: A must-have
Even renewal premium qualifies for tax benefit under Section 80D. Towards self, spouse, children and parents, the maximum deduction that can be availed is capped at Rs 25,000 a year, provided the individual is not above 60 years old. If the premium paid by individual is towards health policy for a parent (senior citizen with age 60 or more), the maximum is capped at Rs 50,000. Illustratively, if someone in the 30% tax slab pays Rs 10,000 premium, the tax liability reduces by about Rs 3,000 and there's a health cover to meet medical expenses. A maximum of Rs 5,000 spent on preventive health check up can be availed as deduction under section 80D , but this limit is within the overall cap of Rs 25,000 or Rs 50,000 (whichever is applicable) and is not exclusive of it
​7. Educational loan: OutflowThinkStock Photos
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​7. Educational loan: Outflow
The interest paid on an education loan for self, spouse, children, or for a student under your guardianship qualifies for tax benefit. Loans taken for siblings and relatives do not qualify. The amount paid as interest in an FY is eligible for deduction from GTI without any limit, thereby reducing one's total taxable income and tax liability. Only the interest portion qualifies for tax benefit, not the principal.

To claim this deduction, make sure that the loan is taken for higher education, i.e. after completing 12th. This deduction is available for eight years, starting from the year in which the interest payment began. One will get the full amount of interest paid as the deduction for eight years from the date of taking the loan or until the interest is paid in full (whichever is earlier). To get I-T benefits under Section 80E, you must take the education loan from any of the scheduled banks in India or from the two notified financial institutions Credila Financial Services and HDFC.
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