Every year, thousands of salaried employees pay more tax than they legally owe. Not because they want to, but because they do not know about the deductions they qualify for. The Income Tax Act offers numerous ways to reduce your taxable income. Some are well-known, like the basic 80C limit. Others fly under the radar despite being available to most working professionals. Here are five commonly missed deductions and how you can claim them on your next return.
Salaried employees often miss valuable tax deductions salaried employees miss every year, such as the extra Rs 50,000 NPS deduction under Section 80CCD(1B), health insurance for parents under Section 80D, savings interest under Section 80TTA, education loan interest under Section 80E, and HRA on rent paid. Most sit outside the usual Section 80C limit.
DEDUCTION ONE: NPS CONTRIBUTION UNDER SECTION 80CCD(1B)
Most people know about the 1.5 lakh limit under Section 80C. Fewer know that the National Pension System offers an additional deduction of fifty thousand rupees under Section 80CCD(1B).
This is over and above the 80C limit. If you invest in NPS, you can claim up to two lakh rupees in total deductions, one and a half lakh under 80C, and another fifty thousand under 80CCD(1B).
The benefit is straightforward. For someone in the thirty percent tax bracket, this additional fifty thousand deduction saves fifteen thousand rupees in tax plus applicable cess.
How to claim: Invest in an NPS Tier 1 account through your employer or directly. Declare the investment in your return under Section 80CCD(1B) separately from your 80C declarations.
DEDUCTION TWO: HEALTH INSURANCE FOR PARENTS UNDER SECTION 80D
Section 80D allows deductions for health insurance premiums. Most employees claim the basic twenty-five thousand rupees for self and family coverage. Many miss the additional benefit available for covering parents.
If you pay health insurance premiums for your parents, you can claim an additional deduction. The limit is twenty-five thousand rupees if your parents are below sixty years old. If they are senior citizens, the limit increases to fifty thousand rupees.
Combined, a person covering themselves and senior citizen parents can claim up to seventy-five thousand rupees under Section 80D. This translates to tax savings of over twenty thousand rupees for those in higher brackets.
How to claim: Ensure the policy is in your parents’ name and you are paying the premium. Keep premium receipts and policy documents. Declare the amount in your return under Section 80D with separate entries for self and parents.
DEDUCTION THREE: HOME LOAN INTEREST UNDER SECTION 24B
Many homeowners focus on the principal repayment deduction under 80C and overlook the interest component. Section 24B allows deduction of up to two lakh rupees on home loan interest for a self-occupied property.
This deduction applies even if you are not living in the property currently, provided it is not rented out. If you have let out the property, there is no upper limit on interest deduction, though it will be set off against rental income.
The two lakh limit is substantial. Combined with the principal deduction under 80C and potential HRA claims if you live in a rented accommodation, homeowners can significantly reduce their tax burden.
How to claim: Obtain the interest certificate from your lender, which shows the yearly interest and principal split. Declare the interest amount under Section 24B in your return. Ensure you have possession of the property, as the deduction applies only after construction is complete.
DEDUCTION FOUR: EDUCATION LOAN INTEREST UNDER SECTION 80E
If you or your spouse took an education loan for higher studies, the interest paid is fully deductible under Section 80E. Unlike most deductions, there is no upper limit on this benefit.
The deduction is available for eight years from when you start repaying the loan or until the interest is fully repaid, whichever is earlier. This applies to loans taken for the education of oneself, spouse, children, or a student for whom you are the legal guardian.
Many borrowers forget this deduction after their education ends, even though they continue paying EMIs with substantial interest components.
How to claim: Get the interest certificate from your lender showing the annual interest paid. Declare the full interest amount under Section 80E. Ensure the loan was taken from a recognised financial institution for approved higher education.
DEDUCTION FIVE: SAVINGS ACCOUNT INTEREST UNDER SECTION 80TTA
Almost everyone earns some interest on their savings account. Section 80TTA allows a deduction of up to ten thousand rupees on this interest income.
This seems small compared to other deductions, but it is essentially free money. You earn the interest anyway. Claiming the deduction just ensures you do not pay tax on the first ten thousand rupees of it.
For senior citizens, Section 80TTB offers an enhanced limit of fifty thousand rupees covering interest from savings accounts, fixed deposits, and recurring deposits combined.
How to claim: Calculate your total savings account interest from all bank accounts. Check your AIS or bank statements for exact figures. Declare savings interest as income under “Income from Other Sources” and claim the 80TTA deduction separately.
Here is a quick summary of the commonly missed tax deductions and how they help reduce tax liability.
| Deduction Section | Deduction Type | Maximum Deduction | Who Can Claim | Key Benefit |
|---|---|---|---|---|
| 80CCD(1B) | NPS Contribution | ₹50,000 (over & above 80C) | Salaried employees investing in NPS | Extra tax saving beyond ₹1.5 lakh limit |
| 80D | Health Insurance for Parents | ₹25,000 (₹50,000 for senior citizens) | Employees paying parents’ health insurance | Higher deductions for family health cover |
| 24B | Home Loan Interest | Up to ₹2,00,000 (self-occupied) | Homeowners with housing loans | Major reduction in taxable income |
| 80E | Education Loan Interest | No upper limit | Education loan borrowers | Full interest deduction for up to 8 years |
| 80TTA / 80TTB | Savings Account Interest | ₹10,000 (₹50,000 for senior citizens) | All salaried taxpayers | Tax-free savings interest income |
PUTTING IT ALL TOGETHER
Each of these deductions addresses a different aspect of financial life. Combined, they can reduce your taxable income by several lakh rupees.
The key is awareness and documentation. Know what you qualify for, keep relevant proofs organised, and declare correctly in your return. If you’re unsure about eligible deductions, a quick call with a tax expert can uncover savings you might have overlooked.
Tax planning is not about complex strategies. It is about claiming what you are already entitled to.
Frequently Asked Questions (FAQ)
Which tax deductions do salaried employees most often miss?
Commonly missed old-regime deductions include the extra NPS deduction under Section 80CCD(1B), health insurance premium for parents under Section 80D, savings account interest under Section 80TTA, education loan interest under Section 80E, and HRA on rent paid.
How much extra can I claim for NPS under Section 80CCD(1B)?
You can claim an additional Rs 50,000 for NPS Tier 1 contributions under Section 80CCD(1B), over and above the Rs 1.5 lakh limit of Section 80C, taking your total possible deduction to Rs 2 lakh.
Can I claim health insurance premium paid for my parents?
Yes. Under Section 80D you can claim an additional deduction for health insurance premiums paid for your parents, over and above the amount for yourself and family, with a higher limit if your parents are senior citizens.
Do these deductions apply under the new tax regime?
Most of these are available only under the old tax regime. If you opt for the new regime you generally cannot claim them, so it is worth comparing both regimes before deciding which one to file under.
