By: Sanjeev Sinha | FE
This is the tax-saving season and during this time most people’s attention usually remains focused on availing the Section 80C deductions of up to Rs 1.5 lakh. Because of this, taxpayers tend to overlook many other tax benefits they are eligible for and, thus, end up paying higher taxes to the government . However, being aware of these less-popular tax deductions would not only help you reduce your income tax outgo, but also the quantum of investment you need to make to avail tax breaks under the Section 80C of the Income Tax Act, 1961. Here we are taking a look at some of such deductions which will help you save more tax:
1. Deduction for rent paid in case of self employed
Under Section 80GG of the Income-Tax Act, 1961, an individual is allowed for deduction in respect of rent paid by him for his own residence. The amount of deduction that can be claimed is the least of rent paid less 10% of his total income; 25% of his total income and Rs 5,000 per month. However, “to claim this deduction, the individual should not have income for which exemption can be claimed under section 10(13A) and neither the individual, spouse of the individual or minor child of such individual should own accommodation in the place of the individual’s employment. Further, the individual should not have any self-occupied residential accommodation,” says Akhil Chandna, Director, Grant Thornton India LLP.
2. Deduction in respect of interest on loan taken for higher education
An individual can claim deduction under Section 80E of the I-T Act with respect to interest paid towards loan taken for pursing higher education (any course of study after passing the senior secondary education) either for self or for relative, i.e. spouse, children or student for whom the individual is a legal garden. This deduction can be claimed for a period of 8 years beginning from the year of repayment of the loan.
3. Deduction in respect of donations to charitable institutions
Usually deduction under Section 80G of the Act is not available at the time of submitting investment proofs to one’s employer. Hence, “the individual tends to miss this deduction which is available on donations made by an individual to certain funds, charitable institutions and so on. The rate of deduction is either 50 or 100 per cent of the amount contributed, depending where the funds are donated. Further, such deductions are restricted to 10% of the gross total income of the donor,” says Chandna.
4. Deduction in case of a person with disability
Under Section 80U of the Act, a resident individual who is certified by the prescribed medical authority to be a person with disability can claim deduction of Rs 75,000 and in case the individual suffers from severe disability, the amount of deduction that can be claimed is Rs 125,000. It is pertinent to note that this deduction can be claimed irrespective of the actual amount of expenditure incurred by the resident individual.
5. Tuition fees paid for kids
Paying tuition fees for children’s education is a mandatory expense on part of the parents. However, only a few people know that this expense is tax deductible. The tuition fees you pay for the education of your kids in school, college or university can be claimed as tax deduction under Section 80C at the time of filing tax return.
6. Expenses Incurred on Treatment of Specified Diseases
Treatment of diseases like cancer, AIDS, etc. requires a lot of money. It puts a lot of burden on the person paying for the treatment. Keeping this problem in mind, the I-T Act offers some relief to the taxpayers in the form of tax deduction under Section 80DDB. “Diseases for which this deduction can be availed are mentioned under rule 11DD of the I-T Act. As per the provisions of Section 80DDB, a taxpayer can claim a tax deduction up to Rs 40,000. If the person incurring expenses on treatment of these specified diseases is a senior citizen, then the deduction can go up to Rs 60,000. Deduction further goes up to Rs 80,000 for a super senior citizen,” says Chetan Chandak, Head of Tax Research, H&R Block India.
7. Deduction on interest earned from Savings Account
Almost all taxpayers maintain one or more savings accounts in banks. These accounts generate income in the form of interest from deposits. It is not widely known but interest earned up to Rs 10,000 as interest can be claimed as deduction. The provisions related to this tax benefit are covered under Section 80TTA of the I-T Act.
8. Interest paid on personal loan taken for house purchase
Tax deduction on interest paid for home loan is a commonly-known tax benefit. This tax benefit comes under Section 24 of the I-T Act. However, many taxpayers ignore this deduction if the tag of home loan is not attached to their loan even if they use it to construct or purchase a house. “It happens because the provisions of Section 24 are misunderstood by common people. You can avail the tax benefits offered by this section even if it was a personal loan taken from relatives or friends. The money from any such loan should be used in the construction or purchase of a house to get the tax benefits,” says Chandak.
9. Interest Paid on Loan taken for Revamp or Reconstruction of House
People are aware about the various tax benefits (Section 24, Section 80EE, and Section 80C) available on purchase or construction of a new house. However, they often miss out the tax benefit available on loans taken for face-lifting your house. Under Section 24b, you can get tax deduction up to Rs 30,000 on interest paid for a loan taken to revamp or reconstruct your house.
10. Reinvest to Save on LTCG
Another less-known tax deduction is the deduction available on long-term capital gains under Section 54 and Section 54F. People who have bought a house can save tax on LTCG arising from the sale of long-term capital assets if such assets are sold within a year from the date of purchase of the house. “If the asset sold is a house which was held for 2 years, then deduction on resulting LTCG can be claimed under Section 54. If the long-term capital asset sold is not a house, then deduction on LTCG can be availed as per the provisions of Section 54F,” informs Chandak.