7 Lesser known income tax deductions
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Paying more taxes is painful. It is worse when you don’t even know that you have overpaid it or could have saved some of it. Just ahead of this investment and tax filing season, we would like to throw some light on some lesser known tax deductions that might help you save your tax.
● Interest on Saving Account deposits (Section 80TTA) :
Section 80TTA was introduced with effect from April 01, 2013 and is applicable from AY 2013-14 and onwards. Section is introduced to provide deduction to an individual or a Hindu undivided family in respect of interest received on deposits (not being time deposits) in a savings account held with banks, cooperative banks and post office. The deduction is restricted to Rs 10,000 or actual interest whichever is lower
● Higher deduction of interest on housing loan (Section 80EE)
An individual is allowed a deduction upto a limit of Rs 1,00,000 being paid as interest on a loan taken from a Financial Institution, sanctioned during the period 01-04-2013 to 31-03-2014 (loan not to exceed Rs 25 lakhs) for acquisition of a residential house whose value does not exceed Rs. 40 lakhs. However the deduction is available if the assessee does not own any residential house property on the date of sanction of the loan.
The Deduction is available for two years i.e. for A.Y. 2014-15 & A.Y. 2015-16. Total Deduction which can be claimed in Both years in aggregate is Rs. 1,00,000/-.
● Set off of capital loss against capital gain
While most of us know that we need to pay taxes on short term or long term capital gains, not many are aware of the fact that capital losses, if any, can be balanced off against gains. So, for instance, if you have made a long-term capital gain of Rs 15 lakh by selling off your property and long-term capital loss of Rs. 3 lakh by selling stocks which are either not listed or are sold off market , the total taxable amount would be Rs. 12 lakh.
Please note Capital Gain on Sale of Shares sold through Stock Exchange cannot be set off against other capital gain as profit from sale of shares of listed companies through stock exchange in exempt. It is important to note that short term losses can be balanced off against both short term as well as long term capital gains. However, long term capital losses can only be balanced off against long term capital gains.
● Deductions in respect of rent paid – for self-employed (Section 80GG)
Deductions under section 80GG in respect of rent paid :Deduction to the extent of Rs 2,000 per month or 25 per cent of total income (whichever is less) is available under Section 80GG of the I-T Act in respect of rent paid by an individual on his accommodation, provided the individual does not get any house rent allowance.
● Illness and disability of dependent (Section 80DD Section 80DDB)
If you have a dependant, who suffers from any of the diseases specified under Section 80DDB, you can claim a deduction of Rs. 40,000. The deduction is higher at Rs 60,000 if the patient is a senior citizen. The diseases include, neurological ones (dementia, dystonia musculorumdeformans, motor neuron disease, ataxia, chorea, hemiballismus, aphasia and Parkinson’s disease), malignant cancers, full-blown AIDS, chronic kidney failure and haematological disorders (haemophilia and thalassaemia). Dependants can include spouse, children, parents and siblings.
However, the patient should be wholly or mainly dependent on the taxpayer and should not have separately claimed any sum from an insurance company for the illness. Similarly, if a taxpayer suffers from a disability, he can claim deduction of Rs. 75,000 under Section 80U. If he has a disabled dependant, he can claim the deduction under Section 80DD.
Disability includes blindness, low vision, leprosy, hearing impairment, loco-motor disability, mental retardation and mental illness. A minor disability won’t get any tax benefits; the disability should be at least 40 %. If the disability is over 80%, the deduction is Rs 1 lakh.
Deduction for Person with disability (Section 80U):
Under Section 80U of the Act, an individual who is certified by the prescribed medical authority to be a person with disability shall be allowed a deduction of Rs. 50,000 and an individual, who is certified as a person with severe disability, shall be allowed a deduction of Rs. 75,000 w.e.f. 01.04.2010 this limit has been raised to Rs. 1 lakh.
● HRA alongwith homeloan :
If you took a home loan and are still living in a rented place, you will be entitled to:
1. Tax benefit on principal repayment under Section 80C
2. Tax benefit on interest payment under Section 24
3. HRA benefit
Of course, you can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete, the HRA benefit stops. If you took a home loan, got possession of the house, have rented it out and stay in a rented accommodation, you will be entitled to all the three benefits mentioned above. However, in this case, the rent you receive would be considered as your taxable income.
● Interest on loan taken for higher education (Section 80E)
Taxpayers also tend to forget that the interest paid on an education loan taken for higher studies or vocational curses qualifies for deduction under Section 80E of the I-T Act. Also, effective April 1, 2008, the said deduction is also available where the loan is taken for the purpose of higher education of spouse or children of the individual or the student for whom the individual is a legal guardian. Thus, if you have taken a loan for higher education, don’t forget to make your claim. Also remember that the deduction benefit on interest is allowed for maximum eight years, or till the interest is fully paid.
We hope that the above mentioned tax deduction options would help you reduce your tax liability to certain extent.