The Most Authentic Guide on Personal Finance and Investments

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Top tax-saving options for 2013-14 (Part 2 of 2)

In Part 1 of the Top tax-saving options, we looked at the many alternatives available under Sec 80C (with a deduction limit of Rs.1 lakh) and which of these are the most preferred options. 

In this 2nd part, we consider other tax savings sections under the I.T. Act.

Section 80D
Deduction is available in the taxable income for the 
a) premiums paid towards medical insurance for self, spouse and dependent children up to a limit of Rs.15,000 
b) premiums paid towards medical insurance of parents up to another Rs.15,000 
c) within the aforesaid limits, you can also claim deduction of up to Rs.5000 spent towards preventive health check-ups.

By the way, if any of the insured persons specified above is a senior citizen, then a higher deduction of up to Rs.20,000 is available.

Section 80E
Deduction is available in respect of the interest paid on the education loans. There is no limit on the interest amount deductible. However, unlike home loans, no deduction is available for principal repayment. 

The education loan has to be for yourself, your spouse or your children only. This deduction is available for up to 8 years.

Section 24 / 80EE
Interest paid on home loan for a self-occupied property is allowed as deduction up to a limit of Rs.1.5 lakhs. However, there is no cap on the interest for properties that are not self-occupied.

This deduction is available only after the construction is complete and the property is ready for occupation. The total interest paid during the construction period can be deducted after the completion and in 5 annual installments beginning from the year of completion.

Under Sec 80EE, an additional limit of Rs.1 lakh is available for interest paid on home loans. But this comes with certain conditions viz. it is only for those who don't own any other house; the property price is less than Rs.40 lakhs; loan amount is less than Rs.25 lakhs; and the loan is sanctioned during Apr 2013 to Mar 2014.

Section 80CCG
This is also called the Rajiv Gandhi Equity Savings Scheme (RGESS). Under this scheme, 50% of the amount invested in equity / equity MFs is allowed as deduction, subject to a maximum deduction of Rs.25,000. However, this deduction is available only if the following conditions are met
- the person's income does not exceed Rs.12 lakhs,
- s/he is a first time investor in equity/equity MFs
- investment is made in specified shares / equity MFs
- while the total lock-in period is 3 years, one can trade in the eligible securities after 1-year of fixed lock-in period.

Given that new investors should not take direct exposure to equity, RGESS-compliant MFs/ETFs would be the preferred option for them. 

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