Tax Planning: Key Deductions and Exemptions Everyone Should Know Before ITR Filing
Filing your Income
Tax Return (ITR) is not just about complying with the law—it is also a
golden opportunity to optimize your finances through effective tax planning. Most taxpayers in India end
up paying higher taxes simply because they are unaware of the available deductions and exemptions under the Income
Tax Act.
In this blog, we will explore in detail the key deductions, exemptions, and smart tax planning
strategies that can help you save money legally and efficiently before
you file your ITR.
Why Tax Planning Matters
Tax planning is the process of organizing your finances so that you minimize tax liability without breaking the law. The benefits include:
Lower tax outgo – by claiming deductions and exemptions.
Better financial management – aligning savings with future goals.
Compliance with tax laws – avoiding penalties or notices.
Increased investment discipline – tax-saving instruments often double up as long-term investments.
Key Deductions and Exemptions to Know Before ITR Filing
The Income Tax Act, 1961 provides various
provisions under Sections 80C to 80U
and exemptions on allowances to reduce taxable income. Let’s break them down.
1. Section 80C – The Most Popular Deduction (₹1.5 Lakh Limit)
Section 80C is the most commonly used tax-saving tool. You can claim up to ₹1.5 lakh in a financial year by investing in specified instruments:
Life Insurance Premiums
Employee Provident Fund (EPF) and Public Provident Fund (PPF)
Equity-Linked Savings Scheme (ELSS) mutual funds
National Savings Certificate (NSC)
Tax-saving Fixed Deposits (FDs) (5 years lock-in)
Principal repayment of Home Loan
Sukanya Samriddhi Yojana (SSY) contributions
Tuition Fees for Children
👉 Tip: ELSS mutual funds offer the shortest lock-in (3 years)
and potential high returns.
2. Section 80D – Health Insurance
Premiums
Health is wealth, but did you know it can also save you taxes?
Deduction of up to ₹25,000 for health insurance premiums paid for self, spouse, and children.
Additional ₹25,000 (or ₹50,000 if parents are senior citizens) for parents’ health insurance.
Preventive health check-up expenses up to ₹5,000 are also allowed within this limit.
👉 Example: If you’re under 60 and pay for your senior citizen
parents’ insurance, you can claim ₹75,000
in total.
3. Section 24(b) – Home Loan Interest
Deduction
If you have a home loan, the interest paid on the loan qualifies for a deduction of up to:
₹2,00,000 per year for self-occupied property.
Full interest for a property that is rented out (no upper cap, subject to conditions).
Combined with 80C (principal repayment), home loan borrowers get significant tax benefits
4. House Rent Allowance (HRA) –
Section 10(13A)
For salaried employees receiving HRA, exemption can be claimed based on the least of the following:
Actual HRA received.
40% (non-metro) / 50% (metro) of basic salary + DA.
Rent paid minus 10% of salary.
👉 Note: If you don’t receive HRA but pay rent, you can claim
deduction under Section 80GG (up
to ₹60,000 per year).
5. Leave Travel Allowance (LTA)
You can claim exemption for travel expenses incurred during domestic trips with family (spouse, children, parents, and siblings).
Allowed twice in a block of 4 years.
Covers travel by air, rail, or bus (actual fare).
Does not cover hotel or food expenses.
6. Section 80E – Education Loan
Interest
If you have taken a loan for higher education (self, spouse, children), the entire interest paid can be claimed as a deduction.
No upper limit.
· Deduction available for 8 years from the year repayment begins.
7. Section 80G – Donations to
Charitable Institutions
Donations made to registered funds and institutions are eligible for deductions:
100% or 50% deduction depending on the institution.
Popular examples: PM National Relief Fund, NGOs, and government-approved trusts
8. Section 80CCD(1B) – Additional
Deduction for NPS
Investments in the National Pension Scheme (NPS) qualify for:
Up to ₹50,000 extra deduction under 80CCD(1B) (over and above 80C limit).
Taxpayers looking to boost retirement savings and lower taxes often choose this.
9. Standard Deduction for Salaried
Employees
Every salaried individual can claim a flat deduction of ₹50,000 from their
income, without needing to submit bills.
10. Exemptions on Long-Term Capital
Gains (LTCG)
You can save capital gains tax by:
Investing gains from selling property into another residential house (Section 54).
Investing in specified bonds under Section 54EC (up to ₹50 lakh).
Using gains for purchase/construction of new house property.
Old vs New Tax Regime: Which One to Choose?
The government introduced the new tax regime with lower slab rates but without most deductions.
Old Regime: Higher tax rates but allows claiming all deductions (80C, HRA, home loan, etc.).
New Regime: Lower tax rates, fewer deductions, simplified filing.
👉 Best suited for:
Old regime – If you have high investments in 80C, insurance, home loan, HRA.
New regime – If you don’t invest much in tax-saving instruments.
FAQs on Tax Planning and ITR Filing
Q1. Can
I claim both HRA and home loan benefits?
Yes, if you live in a rented house and also repay a home loan on another
property, you can claim both.
Q2. Is
it mandatory to submit proof of investment to claim deductions?
Yes, employers may ask for proof. But even if not submitted, you can claim
while filing ITR.
Q3. Can
I switch between old and new tax regimes every year?
Yes, salaried individuals can choose each year while filing ITR.
Q4. What
happens if I miss declaring investments before March 31?
You cannot claim deductions for that financial year. Plan investments within
the financial year itself.
Q5.
Which tax-saving investment is best for beginners?
ELSS (Equity Linked Savings Scheme) is popular for its short lock-in and growth
potential.
Conclusion
Effective tax planning is not just about saving money—it’s about
making smarter financial decisions. By understanding and using the right deductions and exemptions like 80C, 80D, HRA, NPS, and home loan benefits,
you can significantly reduce your taxable income.
Before filing your ITR, take time to review your income, investments, and eligible deductions. Also, compare the old vs new tax regime to see which works best for your situation. With careful planning, you can not only save taxes but also create long-term wealth.
