Don’t miss these tax breaks
Many taxpayers
fail to utilise these deductions while filing their income tax returns
Tax return filing is a process that is often
completed mechanically. However, investing a little time and thought into it
can allow you to claim deductions you might have failed to while submitting
your investment declarations. Read on to see how you can maximise your tax
breaks.
Savings account interest
The balance in your savings account earns interest
every quarter, which is considered part of your total income. However, the
income tax (I-T) department, under Section 80TTA, allows exemption of up to ₹10,000 on this interest.
Interest earned on post office savings will also fetch a similar benefit.
Rent exemption without HRA
Many taxpayers shell out house rent but can’t claim
deductions due to the absence of the house rent allowance (HRA) component in
their salary. Under Section 80GG, you can avail of the benefit for the rent
even if your salary package does not include HRA, provided you are not eligible
for any housing benefit. You will not qualify for this, if your spouse or child
owns the house you live in. The exemption is limited to the least of: rent paid
less 10% of total income; or ₹5,000 a month;
or 25% of total income.
Breaks for specified illnesses
Keeping in mind the fact that treatment of ailments
like cancer, kidney failure or AIDS entails huge expenses, the income tax rules
allow relief under Section 80DDB to taxpayers suffering from such diseases (see
box). They can claim a tax deduction of up to ₹40,000. “If the person is a
senior citizen, then the deduction can go up to ₹60,000,” says Chetan Chandak, Head, Tax research, H&R Block.
If the afflicted taxpayer happens to be a super senior citizen, the relief is
enhanced to ₹80,000.
However, if the expenses incurred have been reimbursed by employers or through
insurance policies, the taxpayers will not qualify for the deduction. If the
reimbursement is partial, they will be eligible for the tax break on the
balance amount.
Ancillary home loan charges
Home loan borrowers know that one of the chief
benefits of the loan is the tax benefits it offers on the principal repayment
(Section 80C) and interest paid (Section 24). However, few know that even the
processing fee paid can be claimed as deduction under Section 24. The
processing fees and other ancillary charges are considered as interest and
qualify as exemptions.
Loans for down payments
Home loan-seekers often borrow from friends and
relatives to arrange for the downpayment. They either do not pay any interest
on such loans or if they do, fail to claim deductions under Section 24, despite
being eligible. Section 24 also covers interest paid on any loan taken for the
purchase, renovation or reconstruction of a house. However, you should draw up
a loan agreement with the lender. The interest earned by the lender will be
taxed as his income.
Deduction for disabilities
If a taxpayer suffers from 40% disability (as
certified by a medical authority), she can claim a deduction of up to ₹75,000 under Section 80U.
Expenses incurred in respect of a disabled dependent will fetch a deduction of ₹75,000 under Section 80DD. If
the disability is severe (more than 80%), the deduction is ₹1.25 lakh. This is a flat
deduction. The disabled should be dependent on the taxpayer for maintenance.
Income of disabled child
If you have made investments in the name of your
spouse or minor child, the income earned will be clubbed with your income under
Section 64 and taxed as per the slab applicable to you. However, in case the
child is disabled, income from investments made in his/her name will not be
clubbed with the income of parents. The latter can use this provision to invest
in taxable instruments like FDs and debt funds.
Setting off losses
If you lost money in investments during the previous
financial year, you can adjust some losses against capital gains from the sale
of stocks, property, gold or debt funds. Short-term capital losses can be set
off against both short-term capital gains as well as taxable longterm capital
gains. Long term capital losses can only be set off against taxable long-term
capital gains.
Benefits for donations made
Typically, deductions under Section 80G on donations
made do not reflect in Form 16. So, this exemption can be claimed while filing
returns. Depending on where you have contributed, you can claim a deduction of
50-100% of the donation made. However, it cannot exceed 10% of your total
income. “If the donation was made in cash, no deduction is allowable if the
amount exceeds ₹2,000,” says
Suresh Surana, Founder, RSM Astute Consulting Group.
Preeti Kulkarni
TOI16JUL18
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