The IT department, to encourage savings and investments amongst the taxpayers have provided various deductions from the taxable income under various sections. 80C being the most famous, there are other deductions which are beneficial for the taxpayers to reduce their tax liability.
New Delhi: We have all heard the famous saying, “saving a penny is earning a penny”. So we can save on taxes and increase income with properly planning on our taxes. For those unaware, Income Tax (I-T) rules allows tax deduction and exemptions on other expenditures other than Provident fund, tax-saving mutual funds, insurance policies, home loan and medical insurance. Here are lesser-known investments, expenditures eligible for tax breaks.
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Lesser known tax breaks
- Covid-19 treatment: In 2021, the government announced that no tax will be levied on funds taxpayers receive from their employers or family and friends for treatment of Covid-19. The same benefit is also extended to those who may have received ex-gratia from employers or well-wishers of a family member who died of Covid-19. So, any such eligible amount received in FY2019, FY2020 or FY2021 can be claimed as exemption in the current assessment year.
- House Rent Allowance: HRA, is a tax benefit available only to salaried employees. Others, including salaried employees who don’t have HRA as part of their compensation package, can claim tax deduction on rent under section 80GG
- Medical expenses: Apart from deduction on premium paid toward a health insurance policy, the income tax rules allow tax breaks for uninsured senior citizen parents, on specified diseases and preventive health check-ups. Taxpayers who pay for the medical treatment, regular-check ups or medicines of their senior citizen parents —those not covered under a medical insurance policy—can claim up to ₹50,000 tax deduction under Section 80D.
- Children’s tuition fee: One parent can claim for up to two children. Therefore, a maximum of 4 children’s deduction can be claimed, i.e. 2 by each parent. Each parent can claim a deduction of up to Rs 1.50 lakh separately every financial year. Please note that the aggregate amount of deduction under section 80C, 80CCC and 80CCD shall not exceed INR 1,50,000 for the individual parent.
- Principal of home loan: Property should at least be held for five years.
- Stamp duty and registration fee on house purchase: Section 80C of the Income Tax Act allows a deduction for stamp duty, registration charges, and other expenses directly connected with the transfer. The maximum amount of deduction under this section is Rs. 1,50,000.
- Interest on NSC National Savings Certificate: Can be claimed for four years as interest is paid out in fifth year.
- Interest in saving account: Up to Rs. 10,000 under BOTTA (not applicable to interest from fixed deposit and recurring deposit)
- Donations: Donations made to a fund backed by the central government can be fully claimed, whereas those made to a private institution are eligible for 50% deductionunder section 80G. (cash donations above Rs. 2000 do not qualify).
- Interest on home improvement loan: Up to Rs. 30,000 under Rs. 2 lakh celling of Section 24 (expenses that add to the property’s value quality)
- Preventive health check-ups up to Rs.5000 quality for deduction under 80D: Deduction on preventive health check-ups falls under the overall Rs.25,000 (Rs.50,000 for senior citizens) ceiling of section 80D
- Deduction for pre-nursery Claim relief on children’s playgroup, pre-nursery and nursery fees: It is possible for any individual who has paid education fees for his or her children to claim this deduction under Section 80C. Parents can deduct the entire amount they have spent on the education of their children under Section 80C. However, the maximum amount of the deduction under Section 80C is Rs. 1,50,000.Read More: All You Need to Know About IRCTC Luggage Rules
It is to be noted that other than Sections 80D, 80C, 80CCC and 80CCD there are several ways for you to save money, which will increase your total wealth over time.
