Know how to save money and slash your tax outflow
A majority of people invest in medical and life insurance policies, Provident Fund schemes and mutual funds, among others, to save tax. It may, however, be surprising to know that our Income Tax Act also allows tax benefits in respect of certain expenses incurred by an individual taxpayer. However, in order to claim this benefit, it is necessary that the amount is spent in the same financial year. Which are these expenses? Here is a list of some of such expenses:
Incurring expensive tuition fees for your children? Don’t worry! Tuition fees paid to any university, college, school or other educational institution situated in India, whether at the time of admission or thereafter, are eligible for deduction under Section 80C of the IT Act. The tuition fees paid for up to 2 children can be claimed under this Section. The fees should be paid in connection with full-time education of the children and should exclude any development fees or donations or payment of similar nature. The benefit is subject to the ceiling of Rs 1,50,000.
Medical treatment of a dependent person with disability
If you have incurred any medical expenditure on the treatment of a dependent family member (i.e. spouse, children, parent, brothers and sister) suffering from specified disabilities, a deduction can be claimed under Section 80DD of the IT Act. The deduction is limited to Rs 75,000 under this Section, and if the dependent is suffering from severe disability, deduction up to an amount of Rs 1,25,000 is available. The deduction under this Section is only available to resident individuals. In case the resident individual himself is suffering from the disability, the above-mentioned amounts are eligible for deduction under Section 80U.
Medical treatment of specified diseases
In case a resident individual has incurred expenditure in connection with treatment of any specified diseases or ailments and has obtained prescription for such treatment from a specified medical specialist, the same can be claimed as a deduction subject to a maximum ceiling of Rs 40,000 as per Section 80DDB of the IT Act. The ceiling shall be Rs 60,000 in case the patient is a dependent senior citizen (i.e. above 60 years) and Rs 80,000 if he is a very senior citizen (i.e. above 80 years).
Interest on loan for higher education
An education loan, apart from funding the careers of aspiring individuals, offers tax benefits also. If you are repaying the installments of a loan taken for pursuing higher education for yourself or your relative (i.e. spouse, children or a student to whom you are a legal guardian), then the interest component shall be entitled to a deduction under Section 80E of the IT Act. The deduction under this Section starts from the year in which the payment of interest on loan is initiated and it continues up to 8 years or up to the year in which the loan is repaid, whichever is earlier. The loans should have been availed from a financial institution or any approved charitable institution for the purpose of higher education.
Principal repayment and interest on loan for residential house property
Taken a loan for buying a residential house in the financial year 2016-17? Home buyers can claim a tax deduction of the interest paid on such loan, subject to a maximum amount of Rs 50,000 under Section 80EE of the IT Act. The value of the house property should not exceed Rs 50 lakh and the amount of loan sanctioned should not exceed Rs 35 lakh. The benefit under this Section can be claimed only by individuals. In case the home buyer owns more than one residential house property on the date of sanction of the loan, benefit under this Section shall not be available.
The principal repayments of such loans can be claimed under Section 80C within the prescribed limit of Rs 1,50,000. This deduction is also applicable on stamp duty, registration fees and transfer expenses incurred in connection with the purchase of house property.
Deduction in respect of rent paid
In case your salary does not include a house rent allowance, then you are eligible to claim deduction of the rent expenditure incurred during the year under Section 80GG of the IT Act to the extent of lower of the following:
# Rent expenditure in excess of 10% of total income;
# 25% of the total income; or
# Rs 5,000 per month.
In order to claim benefit under this Section, it is necessary that no residential accommodation is held by you or your spouse or a minor child at the place where you ordinarily reside or carry out your business or profession.
Certain specific donations are eligible for a deduction under Section 80G of the IT Act. While some specified donations are eligible for 100% deduction, some are eligible for 50% deduction.
Also, deduction for certain donations (whether eligible for 100% or 50% deduction) is available only to the extent of 10% of the adjusted total income, as defined under the IT Act.
Further, in order to claim deduction in respect of donation exceeding Rs 10,000, it should be paid by any mode other than cash.
Please note that the above deductions are available subject to obtaining/furnishing of requisite documentary evidences as prescribed under the relevant provisions of the IT Act. Before claiming any deduction, it is advisable to confirm with your consultant about the eligibility of the expenditure incurred.
Source by financialexpress..