With more then two days past our union budget, many have already started to look forward to our next financial year. The Union Government’s budget, once tabled in the Parliament and passed by the House, becomes effective from the next financial year, starting April 1. But there is still one month to go for the end of this financial year. The month of March. And for majority of the citizens, it is a month of investments and saving taxes from their income. In this column, we have already discussed about saving taxes under the major sections of income tax, primarily the most prominent Section 80C. Today, let us discuss some other lesser-known sections, from where you might be able to squeeze some savings by paying lesser tax, under our prevailing laws.
• Most home loan customers are aware of deductions on interest of the home loan and repayments of the principals. But the processing fees and prepayment charged can also be exempted under Section 24 of the Income Tax Act. Very often, tax payers overlook these minor clauses and end up paying higher taxes. Another noteworthy point to ponder is that, interest on any home improvement loans are also exempted under the same section.
• If a tax payer is a disabled person and is certified by a government hospital, then he/ she is exempted a deduction of Rs. 75,000 under section 80U, for disability of 40 per cent. But for a tax payer with 80 per cent disability, the deduction is raised to Rs. 1.25 lakh. Same amount of deduction is also applicable if you have a dependent with disability under section 80DD. To be eligible for deduction, the disabled person should be wholly or partially dependent on you. If you are claiming deduction for your dependent under Section 80DD, care should be taken that the dependent doesn’t use Section 80U for his deduction, which will be unlawful.
• Again, if you have a dependent who is disabled and if you invest in his or her name, then the income generated from those instruments are not clubbed into your income. In ordinary circumstances, if an investor invest in his spouse or children’s name, then the income generated from them are clubbed into his (the investor’s) income, under Section 64, but not in the case of a disabled dependent. This advantage can be used while investing fix deposits or debt funds.
• If you or your dependent is suffering from certain critical medical ailments, then you are eligible for a deduction Rs. 40,000 under Section 80DDB. The cap is raised to Rs. 60,000 in case of senior citizens. The disease includes few critical neurological disorders, AIDS, cancer, kidney failure, haematological disorder, etc. But again, if your employer or insurer reimburses any amount to you for that particular illness, then that amount will be reduced from the total deductable amount.
• Any savings bank interest upto Rs. 10,000 is tax free under Section 80TTA and upto Rs. 7,000 for a savings account from post office for a joint account holder.
• An individual who has no HRA component in his/ her salary misses out on the deductions. But under Section 80GG one can claim a tax rebate, provided the individual or his/ her spouse or his/ her minor children don’t own any residential property in his/ her place of residence. He/ she will be entitled to a deduction in respect of house rent paid by him/ her in excess of ten per cent of his/ her total income, subject to a ceiling of 25 per cent thereof or Rs. 2,000 per month, whichever is less.
-The Writer is the CEO of EconPenny