It is that time of the year where the focus shifts on taxes, and understanding how to get the maximum possible tax cuts becomes crucial. Well, preparation of your tax savings is an activity that must not be left for the “nth” moment. As a matter of fact, tax savings should be planned well in advance to get maximum benefits. Many a times, ignorance on the basics, or lack of time, or even simply being lethargic can lead to complete chaos that is totally uncalled for. Hence, it becomes important for a taxpayer to be aware of the various sections of the income tax act that would be beneficial to them. The most common section of the Income Tax Act 1961 that offers the maximum deduction of about Rs.150,000 is Section 80C. However, other than section 80C, there are other sections of the Act that offer tax benefits as well. It is time to be aware of these sections and make the best of it. Mentioned below are a few sections of the Act that could benefit you:
1. Section 80GG Home Rent
You can get a tax deduction on the rent paid for your house (House Rent Allowance provided by companies). Though there isn`t any specific cap on this, there are few rules which will indicate the maximum deduction. In case you don`t have HRA, but still pay rent, a deduction can be obtained u/s 80GG up to a sum of Rs. 60,000 per annum.
2. Interest on home loan – Section 24/ Section 80EE
If you are a first-time buyer, and you have paid an interest of Rs.2.25 lakhs for the current financial year on your home loan, a tax deduction of up to Rs.2 lakhs can be claimed u/s 24 and u/s 80EE a deduction of Rs.25000 can be claimed. Under Section 80EE, the deduction is available for taxpayers who have taken a housing loan to purchase a residential house. A deduction of Rs.50000 can be claimed under this section.
3. Section 80D – Health Insurance
Premium paid on health insurance taken for self, family, parents can save tax. A deduction of Rs.25000 can be obtained for health insurance taken for self, family and children. In case you have parents who are senior citizens, the limit has been enhanced to Rs.50000. Therefor the combined deduction would be Rs.75000.
4. Section 80DDB – Expenses on specific diseases
The expenses incurred by any taxpayer towards treatment of any specified disease either to self or the spouse or dependent parents or children or siblings is available as deduction u/s 80DDB. For an HUF, any member can claim this expense.
The deduction is equivalent to the total amount that is spent in actual or Rs. 40,000, which is less. In case the expenses are made towards a person who is 60 years or above, the applicable limit in the FY2018-19 will be Rs. 1,00,000. In case the sum has been received as a reimbursement from an insurer towards the expenses incurred by the taxpayer, then the amount that has been received as a reimbursement will be reduced from the amount permissible as deduction under the section 80DDB.
5. Section 80E: Interest on Education Loan
If you have an education loan taken for yourself, or your child or spouse, the Interest paid on it qualified for a deduction u/s Section 80E. However, you can claim the deduction from the repayment year. Also, the loan must be taken for any course that will be pursued post 12th standard.
6. Section 80G – Donations to Charity
Any contribution that you make to relief funds or charitable institutions that are notified, are eligible for tax deductions.Deductions are offered to either 50% or even 100% as per the Income Tax Act limits. Donations can be done either by cash or even by various channels of banking. However, you must be aware that any cash donation that exceeds Rs.2000 will not be eligible for the deduction. You would be requiring vital details on the receipt of your donation such as name and address of the trust, Registration Number and PAN of the trust, the donor`s name and the amount donated.
7. Section 80DD – Deduction on the expenses of Differently Abled Dependent
In case you are taking care of the expenses of a differently abled dependent who is completely dependent on you for support, the expenditure of up to Rs.75000 can be claimed as deduction, in case the disability exceed 40% but is limited to 80%. In case it exceeds 80%, the deduction can be claimed for Rs.125000. In case the dependent has claimed this u/s 80U, you will not be able to claim it u/s 80DD.
8. Section 80TTA – Interest on Savings A/c
For any person under 60 years of age or an HUF, interest on savings account (post office and bank) up to Rs.10000, can be claimed as a deduction.
9. Section 80TTB – Senior Citizens
Senior citizens can claim a deduction of about Rs.50000 on interest earned on their savings account or post office deposits.
10. Section 80GGA – Donation made to a specific institution
Donations of Rs.10000 and above made to institutions carrying out scientific research or any such university approved by the Government u/s 35(1)(ii), 35(1)(iii), 35CCA or 35CCB, are eligible for a deduction. Also, the donations must not be made in cash. This deduction is not available for anyone who has an income from business or any other profession.
11. Section 80GGC- Donation made to any political party
Donations made to any political party can be claimed for deduction u/s 80GGC to the actual amount donated. There is not upper ceiling limit on this. However, payments have to be made by any mode other than cash.
There are other areas like Section 80QQB (royalty to the author), Section RRB (Royalty income from patents ) which can be considered .The above are a few sections that must be utilized by individuals for tax benefits. In short, awareness is the key. Ensure you are well aware of the income tax bracket you fall in, and the ways in which you can save a good sum of money!