Wise Moves: How to Save Tax in India

Welcome to “Wise Moves: How to Save Tax in India.” Taxes can often feel like a burden, but with the right knowledge and strategy, you can significantly reduce your tax liability and keep more money in your pocket. In this article, we will explore various tax-saving techniques and investment options that can help you save on income tax in India.

Whether you are an individual taxpayer, a homeowner, a business owner, or planning for retirement, there are specific strategies tailored to your situation that can lead to substantial tax savings. We will discuss popular tax-saving investment options, deductions and exemptions, government-backed schemes, and smart tax planning techniques for business owners. Plus, we will also touch upon the importance of seeking professional advice and keeping up with tax law changes.

Saving on taxes not only helps you retain more of your hard-earned money, but it also presents an opportunity to invest in your future and achieve your financial goals faster. So, let’s dive in and discover how you can make wise moves to save tax in India.

Understanding Income Tax in India

Understanding Income Tax in India

Income tax is a crucial part of every individual’s financial planning. Whether you are a salaried employee, a business owner, or a freelancer, understanding the basics of income tax in India is essential. In this section, we will provide an overview of the Indian tax system, different categories of income, and the tax slabs and rates.

Overview of Indian Tax System

In India, income tax is governed by the Income Tax Act of 1961. The income tax department is responsible for collecting taxes and ensuring compliance with the tax laws. Here are a few key points to understand about the Indian tax system:

• Residential status: Your residential status determines how your income will be taxed in India. There are three categories: Resident, Non-Resident, and Resident but Not Ordinarily Resident. The rules for each category vary, so it’s important to determine your residential status correctly.
• Taxable income: Your taxable income is calculated by subtracting the deductions and exemptions from your total income. It is important to note that not all income is taxable. Certain types of income, like agricultural income, are exempt from income tax.
• Filing income tax returns: All individuals, including salaried employees, self-employed individuals, and business owners, whose income exceeds the tax exemption limit are required to file their income tax returns annually. Filing income tax returns is a legal obligation and ensures that you are in compliance with the law.

Different Categories of Income

In India, income is classified into various categories based on its source. Here are the main categories of income:

• Salary income: This includes your salary, allowances, bonuses, and other benefits received from your employer.
• Income from house property: If you own a house or property that is rented out, the rental income is considered as income from house property.
• Income from business or profession: This includes income earned by self-employed individuals, freelancers, and business owners.
• Capital gains: Capital gains are the profits earned from the sale of capital assets like stocks, mutual funds, real estate, etc.
• Income from other sources: This category includes income from interest, dividends, lottery winnings, and other miscellaneous sources.

Tax Slabs and Rates

Income tax in India is calculated based on a progressive tax slab system. The tax rates vary according to the income slab you fall into. Here are the tax slabs and rates for the financial year 2021-2022 for individuals below 60 years of age:

Income Slab	Tax Rate
Up to ₹2.5 lakh	Nil
₹2.5 lakh – ₹5 lakh	5%
₹5 lakh – ₹10 lakh	20%
Above ₹10 lakh	30%

It’s important to note that these tax slabs and rates are subject to change every year. It’s advisable to check the latest rates before filing your income tax returns.

Understanding the basic concepts of income tax in India is the foundation for effective tax planning. In the next section, we will discuss how you can take advantage of tax deductions and exemptions to reduce your tax liability.

Take Advantage of Tax Deductions and Exemptions

One of the key aspects to saving on income tax in India is to take full advantage of tax deductions and exemptions. These are provisions in the tax laws that allow you to reduce your taxable income and consequently lower your tax liability. By strategically planning your expenses and investments, you can maximize these deductions and exemptions and keep more money in your pocket.

Investments and Expenses for Deductions

To avail tax deductions, it’s important to know which investments and expenses are eligible. Here are some common investments and expenses that can be claimed as deductions:

• Life Insurance Premium: The premium paid towards life insurance policies for yourself, your spouse, or any dependent children can be claimed as a deduction under Section 80C of the Income Tax Act.
• Health Insurance Premium: Premium paid for health insurance policies for yourself, your spouse, and dependent children can be claimed as a deduction under Section 80D.
• Home Loan Interest: The interest paid on a home loan is eligible for deduction under Section 24(b). Additionally, under Section 80C, the principal repayment of the home loan can also be claimed as a deduction.
• Educational Expenses: Tuition fees paid for the education of your children can be claimed as a deduction under Section 80C.
• Donations: Donations made to specified institutions and organizations are eligible for deduction under Section 80G.

Popular Deduction Options

Apart from the above-mentioned investments and expenses, there are other popular deduction options that you can consider:

• Employee Provident Fund (EPF): Contributions made towards EPF are eligible for deduction under Section 80C.
• National Pension System (NPS): Contributions made towards NPS are also eligible for deduction under Section 80CCD(1B) in addition to the deduction under Section 80C.
• Interest on Education Loan: The interest paid on education loans for higher studies can be claimed as a deduction under Section 80E.

Exemptions and Benefits

Apart from deductions, there are specific exemptions and benefits that you can utilize to further reduce your tax liability. Here are a few notable exemptions and benefits:

• House Rent Allowance (HRA): If you receive HRA as part of your salary and reside in a rented house, you can claim exemptions on the HRA received subject to certain conditions.
• Leave Travel Allowance (LTA): LTA received from your employer for traveling within India can be claimed as an exemption, subject to certain rules.
• Tax-Exempted Allowances: Certain allowances such as medical allowance, transport allowance, and children’s education allowance are tax-exempt up to a specified limit.

It’s important to note that the availability and applicability of deductions, exemptions, and benefits may vary based on your individual circumstances and as per the latest tax regulations.

“By strategically planning your expenses and investments, you can maximize tax deductions and keep more money in your pocket.”

Take the time to understand the various deduction options and exemptions that are available to you. Consult with a tax advisor or consult the Income Tax Department’s official website for the most up-to-date information on tax laws and provisions. By making informed decisions and utilizing these opportunities effectively, you can significantly reduce your tax burden and save more money. So, go ahead and make wise moves when it comes to tax deductions and exemptions!

Explore Tax Saving Investment Options

When it comes to saving taxes in India, exploring tax-saving investment options is a wise move. These investments not only help you reduce your taxable income but also enable you to grow your wealth in the long run. Here are some popular tax-saving investment options to consider:

1. Employee Provident Fund (EPF)

The Employee Provident Fund (EPF) is a retirement savings scheme that allows employees and employers to contribute a certain percentage of their salary every month. The contributions made to EPF are eligible for tax deductions under Section 80C of the Income Tax Act. The interest earned on EPF is also tax-free.

2. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a government-backed savings scheme that offers attractive interest rates along with tax benefits. Contributions made to PPF are eligible for tax deductions under Section 80C. The interest earned on PPF is tax-free, making it a preferred investment option for many.

3. National Pension System (NPS)

The National Pension System (NPS) is a voluntary retirement investment scheme that allows individuals to contribute towards their retirement funds. Contributions made to NPS are eligible for tax deductions under Section 80CCD(1) of the Income Tax Act. Additionally, an extra deduction of up to Rs. 50,000 can be claimed under Section 80CCD(1B).

4. ELSS and Other Tax-Saving Mutual Funds

Equity Linked Savings Schemes (ELSS) are mutual funds that invest primarily in equity and equity-related instruments. ELSS offers tax benefits under Section 80C. These funds have a lock-in period of three years, making them ideal for long-term investors.

Apart from ELSS, there are other tax-saving mutual funds available in the market, such as tax-saver fixed deposits and debt funds. These funds also offer tax benefits under Section 80C.

Investments in these tax-saving options not only help you save tax but also provide opportunities for wealth creation. It’s important to note that each investment option has its own set of benefits and risk factors. Therefore, it is advisable to carefully analyze your financial goals and risk appetite before making any investment decisions.

In addition to the investment options mentioned above, there are some other tax-saving avenues available, such as the National Savings Certificate (NSC), tax-saving fixed deposits, and the Sukanya Samriddhi Yojana (SSY) for the education and marriage expenses of girl children.

It is essential to consider the lock-in periods, liquidity, risk factors, and investment objectives while selecting the best tax-saving investment options for you. Consult with a financial advisor or investment professional to determine the most suitable investment strategy based on your financial situation.

Remember, tax-saving investments not only help you reduce your tax liability but also assist in building a strong financial foundation for the future. So, explore these investment options and make the most out of them to save tax and secure your financial well-being.

Utilizing Government-Backed Schemes

When it comes to saving on taxes in India, utilizing government-backed schemes can be a smart move. These schemes are designed to provide individuals with tax benefits while also promoting financial security and social welfare. By taking advantage of these schemes, you can not only reduce your tax liability but also secure your future and contribute to the nation’s development. Here are some popular government-backed schemes that you can explore:

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

• The Pradhan Mantri Vaya Vandana Yojana is a pension scheme specifically designed for senior citizens.
• It offers a fixed pension for 10 years, providing financial security during the retirement years.
• Under this scheme, the government guarantees a return of 7.4% per annum, payable monthly.
• The scheme allows for a maximum investment of Rs. 15 lakhs per senior citizen.

Sukanya Samriddhi Yojana (SSY)

• The Sukanya Samriddhi Yojana is a government-backed savings scheme aimed at the welfare of the girl child.
• This scheme offers attractive interest rates and tax benefits.
• Parents or legal guardians can open an account in the name of a girl child below the age of 10.
• Contributions made to the account are eligible for a deduction under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakhs per year.

National Savings Certificate (NSC)

• The National Savings Certificate is a fixed income investment scheme offered by the Post Office.
• It has a lock-in period of 5 years and provides an attractive interest rate, currently at 6.8% per annum.
• Investments made in NSC qualify for a deduction under Section 80C of the Income Tax Act.
• The interest earned on NSC is taxable, but it is considered as reinvested and eligible for a deduction under Section 80C.

Senior Citizen Savings Scheme (SCSS)

• The Senior Citizen Savings Scheme is a government-backed savings scheme for individuals above the age of 60.
• It offers a higher interest rate compared to other fixed income investments.
• Investments in SCSS are eligible for a deduction under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakhs per year.
• The scheme has a maturity period of 5 years, extendable up to 3 years.

By investing in these government-backed schemes, you not only reduce your tax liability but also ensure financial security for yourself or your loved ones. It is important to thoroughly understand the terms and conditions of each scheme before making an investment. Additionally, it is advisable to consult with a financial advisor or tax consultant to understand how these schemes fit into your overall financial plan.

Maximizing Benefits for Homeowners

Owning a home is not just a dream come true but also a wise financial investment. As a homeowner in India, you have the opportunity to maximize your tax benefits and save a significant amount of money. By taking advantage of various deductions and schemes, you can reduce your taxable income and lower your overall tax liability. Here are some smart moves to maximize tax benefits for homeowners:

Home Loan and Housing-Related Deductions

One of the key benefits of owning a home is the tax deductions available on home loan repayments. Here are some deductions you can claim:

• Principal Repayment: Under Section 80C of the Income Tax Act, you can claim a deduction on the principal component of your home loan repayments up to Rs. 1.5 lakh per year.
• Interest Payment: You can also claim a deduction on the interest paid on your home loan under Section 24(b). If you are a first-time homebuyer, you can claim an additional deduction of up to Rs. 50,000 under Section 80EE.
• Stamp Duty and Registration Charges: You can claim a deduction on the stamp duty and registration charges paid for the purchase of your home under Section 80C.
• Pre-Construction Interest: If you have taken a home loan for the construction of a property, you can claim a deduction on the interest paid during the pre-construction period. This deduction can be claimed in five equal installments from the year in which the construction is completed.

Pradhan Mantri Awas Yojana (PMAY)

If you are a first-time homebuyer, you can also take advantage of the Pradhan Mantri Awas Yojana (PMAY), a government scheme aimed at providing affordable housing for all. This scheme offers additional tax benefits for eligible individuals:

• Credit Linked Subsidy Scheme (CLSS): Under CLSS, eligible individuals can avail a subsidy on the interest component of their home loan repayment. The subsidy amount depends on the income category and is directly credited to the loan account. This can significantly reduce the interest burden and reduce the overall repayment amount.
• Affordable Housing Projects: The PMAY scheme also encourages the purchase of affordable housing properties. If you buy a property under the affordable housing scheme, you can claim an additional deduction of up to Rs. 1.5 lakh under Section 80EEA.

Affordable Housing Fund (AHF)

To further promote affordable housing, the government has introduced the Affordable Housing Fund (AHF). This fund aims to provide financial assistance to homebuyers and developers of affordable housing projects. By investing in projects under the AHF, you can avail additional tax benefits:

• Deduction on Interest Component: If you are a homebuyer under an affordable housing project financed by the AHF, you can claim an additional deduction of up to Rs. 1.5 lakh on the interest component of your home loan under Section 80EEA.
• Deduction on Taxable Income: Developers of affordable housing projects can also enjoy a deduction on their taxable income for five years. This deduction can be claimed under Section 80IBA and can help reduce the overall tax liability.

In addition to the above, it’s important to keep track of any changes in tax laws related to homeownership. Consulting with a professional like a chartered accountant can help you stay updated with the latest updates and make informed decisions when it comes to maximizing tax benefits. Remember, maximizing tax benefits for homeowners requires careful planning and a thorough understanding of the available deductions and schemes. By taking advantage of these opportunities, you can not only save on taxes but also create a strong financial foundation for yourself and your family.

Planning for Retirement

Planning for retirement is an important aspect of financial planning. It involves making decisions about saving and investing your money in order to secure your future after you stop working. Retirement planning also includes considering tax implications and optimizing your retirement savings to minimize your tax liability. In this section, we will explore some smart tax planning strategies for retirement in India.

Employee Pension Plans

One of the most common retirement savings options for employees in India is contributing to an employee pension plan. These plans, such as the Employee Provident Fund (EPF) and the National Pension System (NPS), provide a tax-efficient way to save for retirement. Here’s how they work:

• Employee Provident Fund (EPF): EPF is a government-mandated retirement savings scheme, where both the employee and employer contribute a fixed percentage of the employee’s salary. The contributions made to EPF are eligible for tax deductions under Section 80C of the Income Tax Act. The interest earned on the EPF contributions is also tax-free.
• National Pension System (NPS): NPS is a voluntary pension scheme open to both employees and self-employed individuals. Contributions made to NPS are eligible for tax deductions under Section 80CCD of the Income Tax Act. Additionally, NPS offers the flexibility to choose between equity, corporate debt, and government securities as investment options.

Annuities and Pension Schemes

Another important aspect of retirement planning is considering annuity and pension schemes. These schemes provide a regular income stream during your retirement years. Here are some options to consider:

• Life Insurance Corporation (LIC) Annuity Plans: LIC offers various annuity plans that provide regular income for life. The premiums paid for these plans are tax-deductible under Section 80C.
• Pension Plans from Insurance Companies: Many insurance companies offer pension plans that allow you to accumulate a corpus during your working years and receive a regular income during retirement. The premiums paid towards these plans are tax-deductible under Section 80CCC.
• Atal Pension Yojana (APY): APY is a government-backed pension scheme aimed at providing a defined monthly pension to the unorganized sector. The contributions made towards APY are eligible for tax deductions under Section 80CCD of the Income Tax Act.

Tax Benefits for Senior Citizens

As a retiree, you may be eligible for additional tax benefits. Here are some tax-saving provisions specifically designed for senior citizens:

• Higher Basic Exemption Limit: Senior citizens (individuals aged 60 years and above) enjoy a higher basic exemption limit compared to other taxpayers. As of the financial year 2021-22, the basic exemption limit for senior citizens is Rs. 3,00,000.
• Deduction for Medical Insurance Premium: Senior citizens can claim a deduction of up to Rs. 50,000 for the premium paid towards medical insurance under Section 80D.
• Deduction for Medical Expenses: If you are a senior citizen and do not have a medical insurance policy, you can claim a deduction of up to Rs. 50,000 for medical expenses incurred during the year.
• No Tax on Pension Income: For individuals receiving pension income, a specific portion of the pension is exempt from tax, depending on the commutation of the pension.

By taking advantage of these retirement planning options and tax benefits, you can ensure a financially secure future for yourself and your loved ones. However, it is essential to consult with a financial advisor or a chartered accountant to understand the specific tax implications and optimize your retirement savings strategy based on your individual circumstances.

Smart Tax Planning for Business Owners

As a business owner in India, it’s crucial to understand the various tax saving strategies that can help you minimize your tax liability while maximizing your profits. Smart tax planning can go a long way in ensuring that you are making wise financial moves for your business. Here are some important considerations for business owners when it comes to tax planning:

Taking Advantage of Business Expenses

One of the most effective ways to reduce your tax liability is by properly tracking and deducting your business expenses. By keeping detailed records of your expenses, you can claim deductions for legitimate business expenses, such as:

• Office rent and utilities: If you have a physical office space, you can deduct the rent and utility bills associated with it.
• Employee salaries and benefits: The salaries and benefits you provide to your employees are deductible expenses.
• Marketing and advertising: Expenses related to marketing and advertising your business, such as digital marketing costs and promotional materials, can be deducted.
• Travel and entertainment: Business-related travel expenses and entertainment expenses incurred for the purpose of business meetings or events can be claimed as deductions.
• Professional fees: Fees paid to consultants, lawyers, or accountants for professional services related to your business can be deducted.
• Depreciation: You can claim depreciation on assets used for business purposes, such as office equipment, machinery, and vehicles.

It’s important to consult with a tax professional or chartered accountant to ensure that you are correctly categorizing and deducting your business expenses.

Use of Tax Credits

Tax credits are a valuable tool for reducing your tax liability. Unlike deductions, which reduce the taxable income, tax credits directly reduce the amount of tax you owe. As a business owner, you may be eligible for various tax credits, such as:

• Research and Development (R&D) Tax Credit: If your business invests in research and development activities, you may be eligible for this credit, which can offset a portion of your R&D expenses.
• Investment Tax Credit: If you have made significant investments in machinery, equipment, or technology, you may qualify for this credit, which can help reduce your tax burden.
• Start-up Tax Credit: Start-ups and small businesses may be eligible for tax credits aimed at encouraging entrepreneurship and job creation.
• Credits for Social and Environmental Initiatives: If your business undertakes initiatives that promote social welfare or environmental sustainability, you may qualify for credits under government schemes.

It’s important to explore these credits and determine if your business meets the eligibility criteria. Consulting with a tax professional can help you fully leverage the available tax credits.

Incorporation and Choosing the Right Business Structure

Choosing the right business structure can have significant implications for your tax liability. Different business structures, such as sole proprietorship, partnership, limited liability partnership (LLP), and private limited company, have different tax implications. Some considerations to keep in mind include:

• Tax rates: Different business structures are subject to different tax rates, and choosing the right structure can help you optimize your tax liability.
• Personal liability: Choosing a business structure that offers limited liability protection can help safeguard your personal assets in case of business debts or legal issues.
• Ease of scalability: Some business structures are better suited for growth and expansion plans, which can impact your tax planning in the long run.
• Compliance requirements: Each business structure has its own compliance requirements, and it’s essential to understand and comply with the necessary tax filings and reporting obligations.

It’s advisable to consult with a tax professional or legal advisor to determine the most suitable business structure for your specific needs and goals.

Remember, taxes are an integral part of running a business. By implementing smart tax planning strategies, you can ensure that you are maximizing your profits while staying compliant with the tax laws in India.

“A penny saved is a penny earned. By effectively utilizing tax planning strategies, business owners can save valuable funds and invest them back into their business for growth and expansion.”

Seeking Professional Advice and Updates

When it comes to tax planning, seeking professional advice can make a significant difference in maximizing your tax savings and ensuring compliance with the law. Consulting with a qualified chartered accountant or tax advisor can help you navigate the complex world of tax regulations and keep your financial affairs in order. Here are some reasons why seeking professional advice and staying updated on tax-related matters is essential:

1. Expert Knowledge: Chartered accountants and tax advisors have specialized knowledge and expertise in taxation laws and regulations. They are well-equipped to understand the intricacies of the tax system and can provide valuable insights and advice tailored to your specific financial situation.
2. Personalized Guidance: Every individual’s tax situation is unique, and what works for one person may not be the best approach for another. A tax professional can analyze your income, investments, and expenses to develop a customized tax plan that optimizes your savings and minimizes your tax liability.
3. Stay Updated: Tax laws and regulations are subject to frequent changes and updates. It can be challenging for individuals to keep up with these changes and understand how they may impact their tax obligations. A tax advisor can help you stay informed about relevant tax law changes, ensuring that you are always aware of the latest developments and can plan your finances accordingly.
4. Avoid Mistakes and Penalties: Filing tax returns can be a complex process, and any errors or omissions can lead to penalties or legal complications. By working with a professional, you can minimize the risk of making costly mistakes and ensure that your tax returns are accurate and compliant.
5. Tax Planning Strategies: Tax professionals have in-depth knowledge of various tax planning strategies and can help you identify opportunities to save on taxes. They can advise you on investment options, deductions, credits, and exemptions that are available to you based on your financial goals and circumstances.
6. Avoiding Tax Evasion: Seeking professional advice ensures that you comply with all tax laws and regulations, reducing the risk of unintentional tax evasion. Tax professionals can help you understand your obligations and assist you in fulfilling them while staying on the right side of the law.

To make the most of your relationship with a tax professional, consider the following tips:

• Choose the Right Professional: Look for a qualified and experienced chartered accountant or tax advisor who specializes in tax planning. Seek recommendations from friends, family, or colleagues, and research their credentials and track record.
• Develop a Long-Term Relationship: Building a long-term relationship with a tax professional can provide continuity and help you gain a deeper understanding of your tax situation. Regularly consult with your advisor to stay updated on any changes that may require adjustments to your tax plan.
• Maintain Good Record Keeping: Keep all relevant financial documents organized and accessible for your tax professional. This includes income statements, investment details, receipts for deductions, and any other documents that may be needed for tax purposes.

Remember, while a tax professional can provide valuable guidance, it is ultimately your responsibility to ensure the accuracy and completeness of your tax returns. Stay proactive, ask questions, and actively participate in the tax planning process to make informed decisions about your finances.

By seeking professional advice and staying updated on tax-related matters, you can maximize your tax savings, stay compliant with the law, and achieve your financial goals with ease.

Conclusion

In conclusion, saving tax in India is a smart financial move that can help you keep more of your hard-earned money. By understanding the Indian tax system, taking advantage of deductions and exemptions, exploring tax-saving investment options, utilizing government-backed schemes, maximizing benefits for homeowners, planning for retirement, implementing smart tax planning strategies for business owners, and seeking professional advice and updates, you can make wise moves to save tax and improve your financial situation.

Remember, tax saving is a combination of careful planning, knowledge of available deductions and exemptions, and making informed investment decisions. It’s essential to stay updated with the latest tax laws and consult with a qualified professional to ensure compliance and maximize your tax-saving opportunities.

By implementing the tips and strategies discussed in this article, you can effectively reduce your tax liability and increase your financial security. So, start taking advantage of tax-saving options today and make wise moves towards a brighter financial future!

“The hardest thing to understand in the world is the income tax.” -Albert Einstein

Frequently Asked Questions

1. What are some common tax-saving options available in India?

   There are several common tax-saving options in India, such as investing in tax-saving mutual funds (ELSS), contributing to the National Pension Scheme (NPS), utilizing deductions under Section 80C (like PPF, NSC, and FDs), investing in a tax-saving fixed deposit, and purchasing a health insurance policy.

2. How can I save tax by investing in tax-saving mutual funds?

   By investing in tax-saving mutual funds, also known as ELSS (Equity Linked Saving Scheme), you can save tax up to ₹1.5 lakh under Section 80C of the Income Tax Act. ELSS funds have a lock-in period of 3 years and offer the potential for long-term capital appreciation along with tax benefits.

3. What is the National Pension Scheme (NPS) and how can it help save tax?

   The National Pension Scheme (NPS) is a retirement savings scheme in India. By contributing to NPS, you can save tax under Section 80C (up to ₹1.5 lakh) and an additional tax benefit of up to ₹50,000 under Section 80CCD(1B). NPS offers the opportunity for long-term wealth creation and financial security during retirement.

4. Can I claim tax deductions on my investments under Section 80C?

   Yes, you can claim tax deductions on investments made under Section 80C of the Income Tax Act. Some popular investment options in this section include Public Provident Fund (PPF), National Savings Certificate (NSC), and Tax-saving Fixed Deposits (FDs). However, there is an overall limit of ₹1.5 lakh per financial year for claiming deductions under this section.

5. Is purchasing a health insurance policy a tax-saving option?

   Yes, purchasing a health insurance policy can help you save tax under Section 80D of the Income Tax Act. The premium paid for health insurance for yourself, your spouse, children, and parents is eligible for tax deductions, with higher deductions for senior citizens. It offers dual benefits of tax savings and financial protection during medical emergencies.