Investment Declaration To Get Tax Exemption

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  • 08 Feb 2023

If you do your tax planning at the beginning of the financial year, you could end up with bigger savings. But you must also keep in mind that there is an upper limit to how much you can claim as deductions.

Read more: Save tax with tax-exempted allowance

Tax Exempt Investments To Claim Tax Deductions

As a taxpayer, you can use various tax exempt investments and tools to claim deductions from your total income. Some of these are as follows:

Interest On Your Savings Accounts:

Interest earned from your savings accounts is tax-deductible. The interest amount you earn from your savings deposits is not taxed. This benefit comes under Section 80TTA of the Income Tax Act 1961. The conditions are as follows:

  • If your interest income from savings accounts is up to Rs 10,000 per year, you can claim tax deductions.
  • Your savings account must be with a bank, post office, or co-operative society.
  • If the savings account interest earned from these sources exceeds Rs 10,000, the extra amount will be taxed.
  • Senior citizens are not entitled to this benefit.

Health Insurance Premium:

You can get tax deductions towards the premium paid for health plans under Section 80D. The maximum deduction you can claim on your health insurance premium is Rs 60,000.

Income From Royalty:

If you are a writer and earn royalty from your published books, you can enjoy lower income tax liability.

What Is Royalty Income?

Authors receive a certain amount of monetary compensation from publishers. Called royalty income, this amount can be used to claim deductions under Section 80QQB. The tax-deductible amount can be up to Rs 3 lakh, or the gross total income earned by the author, or whichever is less.

Criteria For Claiming Royalty Income Deductions:

You can claim a deduction towards royalty income under certain conditions:

  • You are a resident Indian author. Joint authors of books are also eligible for this deduction. (Note that publications such as journals, guides, newspapers, school textbooks, pamphlets, etc. do not qualify as books in this sense.)
  • Royalty income is included in the gross total income of the taxpayer.
  • If you have received a lump sum royalty amount, you can claim 15% of the value of the books sold in a year.

Read More: Benefits of filing income tax returns

Tax Benefits Of Education Loan:

An education loan not only funds your higher studies but also reduces your overall tax burden. Under Section 80E, you can claim a deduction in respect of the interest paid on your education loan. The deduction is applicable only to the interest paid on the EMI, not the principal part of it.

Who Are Eligible To Claim This Deduction?

  • You can get this benefit if you take out a loan for your own higher education, or for the education of your spouse or children. Also, you can claim this deduction if you have obtained such a loan for the education of your legal ward.

Royalty On Patents:

To encourage innovation and economic growth, the government offers tax benefits to patent holders. This falls under Section 80 RRB of the Income Tax Act.

The patent holder of a particular invention can claim tax deductions up to Rs 3 lakh on income from their patented inventions. In case the income is less than Rs 3 lakh, it is allowable to claim deductions towards the actual royalty income.

Eligibility Criteria:

To claim deductions under this section, patent holders have to fulfil certain conditions:

  • They have to be resident Indians.
  • Only patentees can claim this tax deduction. Individuals without original patents are not eligible.
  • The patent should be registered under the Patent Act of 1970, either on or after 1 April 2003.

Read More: Investments under Section 80C

Tax Implications Of Home Loans:

Your existing house building loan can help you save on tax under Section 80EE. The particulars of this benefit are as follows:

  • You can claim deductions up to Rs 2 lakh towards your home loan interest. But the exemption for this tax exempt investment can be enjoyed only after the building is constructed.
  • If you are a first-time home-owner, you are eligible for an additional Rs 50,000 deduction towards the interest paid. But, for this to happen, the property price must be less than Rs 50 lakh and the loan amount should not exceed Rs 35 lakh.
  • You can get tax deductions up to Rs 1.5 lakh for the principal paid.
  • Deductions for the amount spent on stamp duty and registration are capped at Rs 1.5 lakh.

Tax Benefits Of Mutual Fund Investments:

Mutual funds are a great option to build a sound financial corpus. They also have a positive impact on your tax outgo. Your mutual fund investments can help you claim tax deductions in various ways:

Equity-linked Savings Schemes:

Equity-linked savings schemes (ELSS) are an effective instrument to claim tax deductions. Investments made in ELSS up to Rs 1.5 lakh are considered tax exempt investment under Section 80C.

Dividends As Tax-deductible Income:

Fund houses periodically distribute a part of the profit earned in the form of dividends. As an investor, you do not have to pay any income tax on the dividends received. To top it all, there is no upper limit to this exemption, too.

Gains Tax:

When you sell mutual fund units, the profit is considered your capital gain. If you hold the units for more than a year, the capital amassed is seen as a long-term capital gain (LTCG). LTCG up to Rs 1 lakh is tax-deductible.


The various investment instruments discussed above can help you save a good amount of money at the end of the financial year. For efficient tax planning, you should go over the eligibility criteria and the permissible limits mentioned in the relevant sections of the Income Tax Act.

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