One can save tax by investing in government-specified securities that fall under Section 80C. Section 80C is a part of the Income Tax Act, 1961, that allows Indian citizens to lower their taxable outgo by decreasing their taxable income by investing in a few government-defined citizens.

By investing in instruments that fall under the Section 80C, one can reduce his/her taxable income by maximum Rs. 1,50,000 per financial year.

Thus, ELSS is a very good investment option for those who want to see their money grow as well as those who want to save on their taxes in a legal manner.

Section 80C instruments are:

1. Five- year bank deposits; with a lock-in period of 5 years 2. Public Provident Fund (PPF); with a lock-in period of 15 years 3. National Savings Certificate; with a lock-in period of 5 years 4. National Pension Scheme; with a lock-in up to retirement 5. ELSS Funds; with a lock-in period of 3 years

Section 80C instruments

Lock-in period (yrs)

Returns

Five- year bank deposits

5

6-7%

Public Provident Fund (PPF)

15

7-8%

National Savings Certificate

5

7-8%

National Pension Scheme

Up to retirement

8-10%

ELSS Funds

3

12-18%

Other than Section 80C, there are a few more ways through which you can save additional taxes. A few of those are:

Paying insurance premiums for parents

You can avail of tax deduction under Section 80D by paying health insurance premiums for your dependents- parents, spouse and children. You can avail deduction of up to Rs. 25,000 for your spouse and children and through premium payment for your parents, you can get an additional deduction of Rs. 25,000. Thus, premium payment for senior citizen parents can get you tax deduction worth Rs. 50,000.

Dependents with disability and diseases

You can claim deductions under Section 80DD for expenses incurred for the treatment and rehabilitation of your dependent relatives, if they are disabled and are completely dependent on you. In fact, the amount paid by an individual towards buying specific schemes or policies for disabled dependents’ maintenance is also eligible for deduction.

Children’s’ tuition fees

If you have children, you can avail of tax deductions of up to Rs 1.5 lakh as Section 80C allows tuition fees to be deducted from taxes. You can claim this benefit for the payment of school fees for up to two children.

Additionally, you can also consider investment in Sukanya Samriddhi Yojna for availing tax benefits. Please note, only tuition fees for up to two children are eligible for tax deduction.

Education loan for children

If you have taken an education loan for your child/children, then that too can be exempt from tax under Section 80 (E). Please note, unlike other loan deductions, interest payment on education loan is entirely tax-free without any ceiling on the amount.

Paying rent to your parents A salaried individual can avail tax deduction in the form of house rent allowance (HRA) exemption for rent payment. This includes the rent paid to parents if the individuals live in the parents’ home. However, for one to avail of this tax deduction, the house needs to be owned by the parents and not co-owned by you. The rental payment would be taxable in the hands of parents as per the applicable tax slab.

Investing in parents’ name

You can reduce your tax outgo by transferring money to your parents' accounts and then investing in their name. Senior citizens are eligible for a basic tax exemption of Rs 3 lakh and super senior citizens, above the age of 80 years are eligible for tax exemption of Rs 5 lakh.

This investment amount will not attract gift tax in the parent’s hands. You can then invest the amount in a fixed deposit or other investment instruments in your parent’s name.

If your parents fall under a lower tax slab, the tax liability would be lower than what it would have been, had you invested in your name. Your parents can then avail further tax deduction by investing in instruments that are eligible for tax deduction under Section 80C.

Additionally, you can also transfer the money to your non-minor children or spouse, if they fall in a lower tax bracket than you to reduce tax liability.