Tax Deductions You're Missing in India: Lesser-Known and Overlooked Tax Saving Provisions Explained
Introduction
Taxes are an inevitable part of our financial lives, but the Indian Income Tax Act, 1961, offers a wide array of deductions to help ease the burden on taxpayers. While sections such as 80C for investments and 80D for health insurance are well-publicized, a significant number of deductions are either not widely known or frequently overlooked. This can lead to higher tax outgo and missed savings for millions of Indian taxpayers—including salaried employees, self-employed professionals, small business owners, and retirees.
This comprehensive guide uncovers the lesser-known and often-missed tax deductions available under the Income Tax Act. For each deduction, we explore what it covers, eligibility criteria, limits, documentation, and the practical steps required to claim it. Real-life examples relevant to common taxpayer categories are integrated throughout, ensuring every reader can relate and find actionable savings.
Understanding the Tax Regimes in India: Context for Deductions
Before diving into specific deductions, it is crucial to understand the context of India's dual tax regime structure. The "old regime" allows for multiple exemptions and deductions but comes with higher basic tax rates. In contrast, the "new regime" features reduced tax rates but removes most exemptions and deductions (with only a handful of exceptions, such as employer NPS contributions and select allowances for disabled employees).
Important: Most deductions detailed in this guide apply only under the old regime. Taxpayers must make a conscious choice of regime each year (or, in case of business/profession, at prescribed intervals) to maximize their tax benefits.
Section 80C: Beyond the Usual — Overlooked Investment Deductions
What Qualifies Under 80C?
Section 80C is the most popular tax-saving provision, but its true scope is broader than most realize. Taxpayers are often familiar with the ₹1,50,000 limit, contributions to Provident Fund (PF), Public Provident Fund (PPF), and Employee Provident Fund (EPF), or life insurance premiums. However, many only partially utilize this section, missing out on eligible expenditures such as children's tuition fees, principal repayments on home loans, stamp duty, registration fees, and various government schemes.
Note: The ₹1.5 lakh ceiling is cumulative for all eligible investments and payments.
Examples
Salaried Employee: Swati pays ₹60,000/year to an ELSS mutual fund, ₹45,000 as life insurance premium for her spouse, and ₹1 lakh as principal repayment on her housing loan. However, she didn't know her two children's tuition fees—₹40,000 each at a local CBSE school—were eligible expenses under 80C. Had Swati included these, she would have maximized her 80C limit and reduced her tax burden by thousands.
Small Business Owner: Raj started a Sukanya Samriddhi Yojana account for his 8-year-old daughter and deposited ₹60,000, but never claimed this deduction, thinking only PPF and insurance qualify. Including this would have enhanced his 80C claim for the year.
How to Claim 80C Deductions
- Include eligible investments and expenses in the "80C" schedule of your ITR.
- Keep receipts for tuition fees, registration/stamp duty, and life insurance policy details.
- Home loan principal—obtain a breakup certificate from your lender.
Section 80D: Health Insurance Premiums & Preventive Health Check-Ups
What Qualifies Under Section 80D?
Section 80D is designed to incentivize health insurance and preventive care, offering annual deductions over and above the 80C limit. It covers health insurance premiums for yourself, spouse, dependent children, and parents. Critically, deductions are higher when parents are senior citizens.
Deduction Structure
| Category | Maximum Deduction |
|---|---|
| Self, Spouse, Children (Below 60 years) | ₹25,000 |
| Self, Spouse, Children (60 years or above) | ₹50,000 |
| Parents (Below 60 years) | ₹25,000 |
| Parents (60 years or above) | ₹50,000 |
Also Covered:
- Preventive health check-ups (with cash or digital payment, within limit of ₹5,000).
- Medical expenses for senior citizens, if no insurance exists (up to ₹50,000).
- Contributions to Central Government Health Scheme (CGHS), only for self & family.
NOT Covered:
- Premium paid for siblings, working adult children, in-laws, or grandparents.
- Group insurance paid by employer, unless paid by employee additionally.
Examples
Salaried Employee: Ravi, aged 38, pays a health insurance premium of ₹22,000 for his wife and two kids, and ₹35,000 for his 62-year-old father. He also spent ₹5,000 on a preventive health check-up. His total eligible deduction: ₹25,000 (self/family, capped) + ₹35,000 (father) = ₹60,000.
Senior Citizen, No Insurance: Mrs. Das, aged 68, has no health insurance but spent ₹36,000 on treatment/medicine. She can claim up to ₹36,000 (since max limit is ₹50,000 for uninsured seniors).
Documentation and How to Claim
- Keep premium payment receipts and health check-up invoices.
- For preventive check-ups, cash payment is allowed (within ₹5,000 limit).
- Enter insurer's name, policy number, and breakup in ITR.
Section 80E: Education Loan Interest
What Qualifies?
Section 80E gives relief for the interest paid on education loans. There is no upper limit—the entire interest paid is deductible for up to 8 years from the start of repayment. The loan can be for the taxpayer, spouse, children, or a legal ward, and cover higher education (technical, professional, or graduate/postgraduate, in India or abroad).
Key Features
- Deduction only for the interest component (not principal).
- Loan must be from a recognized financial institution or approved charitable trust.
- Maximum period: 8 consecutive years, starting from year of repayment.
- Available only under old regime.
Examples
Parent: Mr. Verma took a ₹10 lakh loan for his daughter's M.Tech. He pays ₹1.2 lakh/year as interest for 7 years. Each year during repayment, the full ₹1.2 lakh can be claimed as a deduction.
Self: Priya, a young professional, took an education loan for an MBA in the UK. She repays ₹95,000/year as interest. For each year of repayment (up to 8 years), she claims the full interest amount.
How to Claim
- Collect an interest certificate from your bank/lender breaking up principal and interest components.
- Enter the eligible deduction in the 80E section of your ITR.
- Maintain proof of repayment and loan documents.
Section 80G: Donations to Charitable Institutions
What Qualifies?
Section 80G provides deductions for donations to specified funds, organizations, or trusts. The deduction can be 100% or 50%, with or without qualifying limits, depending on the donee. From FY 2017-18, donations above ₹2,000 must be made by digital mode to qualify.
Ineligible: Donations in kind (food, clothing, etc.), casual donations, or cash donations above ₹2,000.
Documentation
- Obtain a stamped receipt with PAN, name, and 80G registration of the organization.
- For NGO/charity donation, verify registration on the Income Tax portal.
- For donations with limits, calculate 10% of adjusted Gross Total Income to avoid over-claiming.
How to Claim
- Fill recipient's PAN, receipt details, donation amount, and breakup in ITR.
- Retain and upload scanned copy if e-filing; maintain original for possible future scrutiny.
Section 80GGA: Scientific Research and Rural Development Donations
For taxpayers not having business income, donations for approved scientific research or rural development programs are 100% deductible—but must be made by cheque/electronic transfer if above ₹10,000. These include donations to specified universities, rural development funds, or afforestation funds.
Section 80GG: Rent Paid by Those Not Receiving HRA
What Qualifies?
Section 80GG helps taxpayers who pay rent but do not receive House Rent Allowance (HRA). Applicable to self-employed, freelancers, and salaried individuals whose employers don't include HRA in salary structure.
Deduction Limit
The least of the following:
- Actual rent paid minus 10% of adjusted total income,
- ₹5,000 per month (₹60,000/year),
- 25% of adjusted total income (excluding capital gains, 80GG deduction, and certain types of foreign/lottery income).
Conditions:
- No residential property owned by self/spouse/minor child in work city.
- Must submit Form 10BA in addition to ITR.
- Only available under the old regime.
Freelancer: Anurag pays ₹12,000/month as rent in Bengaluru (₹1,44,000/year) with gross taxable income of ₹5.5 lakh. His deduction will be the least of:
- ₹1,44,000 - 10% of ₹5,50,000 = ₹89,000
- ₹60,000 (₹5,000 per month)
- ₹1,37,500 (25% of ₹5,50,000).
So, ₹60,000 can be claimed. Anurag must submit Form 10BA online and retain rent receipts with landlord details.
Tip: If renting from parents, a legal rent agreement and parents' declaration of rental income in their ITR is essential.
Section 80TTA: Savings Account Interest
What Qualifies?
Section 80TTA allows a deduction of up to ₹10,000 per year on the interest earned from savings accounts with banks, post offices, or co-operative societies. Not applicable to interest from fixed or recurring deposits.
- Applies only to individuals and HUFs (except senior citizens, who get 80TTB).
- If the total interest from all savings accounts is below ₹10,000, the full amount can be claimed; otherwise, only ₹10,000.
- For NRIs: Only interest from NRO savings accounts qualify; NRE accounts are already tax-free for interest.
Salaried Employee: Rina earns ₹8,500 interest from her bank's savings account and another ₹2,200 from a co-op bank account (total ₹10,700). She can claim ₹10,000 as deduction under 80TTA and pay tax only on ₹700.
Section 80TTB: Senior Citizens' (60+) Interest Deduction
What Qualifies?
- ₹50,000 is deductible on total interest from bank, post office, or co-op society deposits—including FDs, RDs, and savings accounts.
- Only available to resident senior citizens (60+).
- Not applicable to interest from corporate FDs, bonds, or debentures.
TDS Tip: Banks do not deduct TDS on interest payment up to ₹50,000 for senior citizens. If TDS is deducted by mistake, a refund can be claimed.
Senior Citizen: Suresh (age 66) earns ₹16,000 from FDs, ₹9,000 from post office Time Deposits, and ₹15,000 from savings accounts (total ₹40,000). He pays no tax on this interest, as it's below the ₹50,000 limit.
Section 80DDB: Medical Expenditure on Specified Diseases
What Qualifies?
Section 80DDB grants deductions for expenses incurred on treatment of specified critical illnesses for self or dependents (spouse, children, parents, or siblings).
| Category | Maximum Deduction |
|---|---|
| Individual Below 60 years | ₹40,000 |
| Senior Citizen (60+ years) | ₹1,00,000 |
Eligible illnesses: Cancer, AIDS, chronic renal failure, Parkinson's, hemophilia, thalassemia, certain neurological diseases (with ≥40% disability), etc.
How to Claim:
- Obtain a certificate from a specialist with a recognized postgraduate degree (MD/DM/MCh, as applicable).
- Claim only net expenses: deduct any reimbursement from insurer/employer before claiming deduction.
- Fill "80DDB" section in ITR.
A family incurs ₹85,000 as non-insured expenditure for a 61-year-old mother's chemotherapy. Deduction available: ₹85,000 (as it is less than ₹1 lakh).
Section 80DD & 80U: Disability-Related Deductions
Section 80DD: For Dependent with Disability
- Deduction is for resident individuals or HUFs supporting a dependent with ≥40% disability.
- Normal Disability (≥40% but <80%): Flat ₹75,000
- Severe Disability (≥80%): Flat ₹1,25,000
- Covers expenses on treatment, training, rehabilitation, or contributions to insurance schemes for the dependent.
- Documents: Disability certificate (renewable every few years); self-declaration of expenses or insurance receipts.
- Only claimed if the dependent does not claim 80U for themself.
Section 80U: For Taxpayer with Disability
- For a resident individual with a certified disability:
- Flat ₹75,000 (general disability 40%-80%)
- Flat ₹1,25,000 (severe disability ≥80%)
- Not linked to actual expenses.
Section 80EE & 80EEA: First-Time Homebuyer Interest Deduction
80EE: For Loans Sanctioned 1 Apr 2016 – 31 Mar 2017
- Only for first-time home buyers
- Extra deduction of up to ₹50,000 per year on home loan interest (in addition to Section 24(b)'s ₹2 lakh limit)
- Property value ≤ ₹50 lakh; loan amount ≤ ₹35 lakh; only from recognized bank.
80EEA: For Loans Sanctioned 1 Apr 2019 – 31 Mar 2022
- Extra deduction of up to ₹1,50,000 per year (beyond Section 24(b)), for affordable housing loans.
- Property stamp duty value ≤ ₹45 lakh; individual must not own any other house property as of the sanction date.
- Taxpayer cannot claim both 80EE and 80EEA for the same property.
Example: Ravi bought his first flat for ₹44 lakh in 2020:
- Loan: ₹40 lakh, sanctioned by SBI in May 2021.
- Interest paid: ₹2.35 lakh (per year).
- Deductions:
- ₹2 lakh under Section 24(b)
- Remaining ₹35,000 under 80EEA
- Total: ₹2.35 lakh deduction
Note: These are only valid under the old regime; cannot be claimed together for the same property.
Section 24(b): Home Loan Interest on Self-Occupied Property
What Qualifies?
- For self-occupied homes, up to ₹2 lakh interest deduction per year.
- No upper limit for let-out or deemed let-out property, but maximum total loss under "House Property" is capped at ₹2 lakh.
- Claimable for purchase or construction loans—must be completed within 5 years from the end of the financial year in which the loan was taken.
- For repairs or renovations: Deduction is only ₹30,000/year.
IT Professional: Neha paid ₹2.5 lakh as home loan interest for her self-occupied flat (loan taken in April 2020). She can claim ₹2 lakh deduction under Section 24(b) and combine with ₹1.5 lakh principal under 80C for the same year.
Pre-construction interest: Amount paid as interest before possession/completion (up to five years) can be clubbed with post-possession deduction as 1/5th installment for five years.
Section 80CCD: National Pension Scheme (NPS) Contributions
What Qualifies?
- 80CCD(1): Self Contribution - Up to 10% of salary (Basic + DA) for salaried or 20% of gross total income for self-employed, within the overall 80C/80CCC/80CCD(1) limit of ₹1.5 lakh.
- 80CCD(1B): Extra ₹50,000 - Additional deduction over and above the ₹1.5 lakh ceiling.
- 80CCD(2): Employer Contribution - Up to 14% of salary for central/state government employees, 10% (private); available in both old and new regime. Not counted within ₹1.5 lakh ceiling.
Private Employee: Anu contributes ₹80,000 to NPS, while her employer adds ₹60,000 (10% of basic+DA). She also contributes ₹50,000 extra voluntarily. She can claim:
- ₹80,000 towards 80CCD(1) (within 80C/CCC ceiling),
- ₹50,000 towards 80CCD(1B) (over the ₹1.5 lakh cap),
- ₹60,000 under 80CCD(2) (fully deductible, even in new regime).
Section 80JJAA: Employment Generation for Businesses
Who Can Claim?
Businesses (individuals, companies, LLPs/firms) that are audited under 44AB and hire new, full-time employees.
Deduction
30% of additional employee cost (salary, not including employer's PF/ESI contributions or lump-sum payments). Deduction is claimed for three consecutive years starting from the year of employment.
Conditions:
- Employee's salary ≤ ₹25,000/month, must be employed at least 240 days (150 if in apparel, leather, or footwear sectors), must join recognized PF.
A manufacturing business with 40 employees hires 5 more full-time workers at ₹18,000/month each in June, for the full year.
- Additional salary cost = 5 × ₹18,000 × 12 = ₹10,80,000
- Deduction = ₹3,24,000 for FY, repeat for next two years (if eligibility is maintained).
Section 10(13A): House Rent Allowance (HRA) Exemption
Applicability
For salaried employees receiving HRA as part of their compensation. Claimable if employee lives in a rented residence (cannot own a home in work city).
Exemption Calculation (least of):
- Actual HRA received
- Rent paid minus 10% of salary (basic + DA)
- 50% of salary (metro cities—Delhi, Mumbai, Kolkata, Chennai), or 40% for others
Tip: Submit rent receipts and landlord's PAN if rent > ₹1 lakh/year.
Section 10(14): Special Allowance Exemptions
Common Allowances
- Children's Education Allowance: ₹100/month per child (max 2)
- Hostel Allowance: ₹300/month per child (max 2)
- Transport Allowance: For disabled employees, up to ₹3,200/month
- Other allowances (e.g., uniform, research, academic) may be fully exempt if incurred for official purposes.
Other Overlooked Salary Benefits
- Leave Travel Allowance (LTA): Exempts domestic travel costs on leave for employee and family, claimable twice in a block of 4 years (applicable only for actual travel tickets; not hotels/food).
- Standard Deduction: Flat deduction from salary/pension (₹50,000 in old, ₹75,000 in new regime).
- Mobile & Internet Reimbursements: Non-taxable if paid on actual bills for official duty.
- Books & Periodicals: Official reimbursements are exempt; need receipts.
Frequently Overlooked Deductions: Key Reasons & Mistakes
- Wrong Regime Chosen: Many switch to the new regime for lower rates, unaware they forgo all deductions except only a couple of employer benefits.
- Documentation Issues: Failure to save receipts, insurance premium proofs, or required forms (e.g., 10BA for 80GG, medical/disability certificates).
- Not Claiming for Tuition/Stamp Duty: These are valid 80C claims but often missed.
- Double-counting / Overlapping: Section 80EE and 80EEA can't be claimed together; similarly, 80TTA and 80TTB are mutually exclusive.
Conclusion: How to Maximize Your Tax Savings
Tax deduction awareness is your strongest weapon against unnecessary tax outflows. Whether you are a salaried professional, a small entrepreneur, a freelancer, or a retiree, understanding these lesser-known and often-overlooked provisions can save you thousands—or even lakhs—each year.
- If you're paying substantial tuition, rent (without HRA), a home loan EMI, or interest on an education loan—double-check every relevant section.
- Maintain and organize all relevant documents—certificates, receipts, rent agreements, or NPS account statements.
- Choose your tax regime strategically. If you can claim substantial deductions, the old regime may leave you with a lower net tax.
- When in doubt, consult a professional, especially if you have complex scenarios like joint home loans, multiple housing properties, or foreign income.
By actively reviewing your annual finances, identifying missed claims, and filing your returns accurately, you can take full advantage of the Indian Income Tax Act's relief measures and legitimately lower your tax liability.
Have more questions or want to clarify your eligibility? Leave a comment or consult a professional for personalized tax planning—your tax-saving journey can start today!
Note: The figures, eligibility and regulations mentioned above are accurate for AY 2025-26 (FY 2024-25) as per the Income Tax Act and Finance Act amendments up to November 2025. Always check the income tax department website and consult updated resources for changes in subsequent years.