MONEY SMART – Dipankar Jakharia
Let’s discuss some lesser-known avenues for income tax deductions to optimise your tax savings.
You have ten more days left for this financial year-end. Let me correct it further. You have only eight working days left for this financial year to end. By this time you must have already explored everything for the exemption of Rs. 1.5 lakhs under Section 80C of the 1961 Income Tax Act. The Public Provident Fund, National Savings Certificate, Equity Link Saving Schemes, Life Insurance, five-year bank fixed deposits and a host of other products qualify for income tax rebate under this section. But what about other lesser-known sections in which you can optimise more of your income tax savings?
Today let us learn about such lesser-known income tax deductions:
l If you are a salaried employee, you get House Rent Allowance. Most of us know this. But what if you are a self-employed person and are paying rent for your accommodation? You can use Section 80GG and get a deduction on the rent you pay for your residence. It will be calculated at the lowest value from any of the three below:
* Rs. 5000 per month.
* 25 per cent of your total income.
* Actual rent paid, minus ten per cent of your annual income.
* Another Section is 80E. In this section, you get a rebate on the interest payment of any student loan taken. If you have taken a student loan for yourself or for your spouse or children or even as a legal guardian, you are eligible for the rebate under this section. This rebate will start from the moment you start paying your EMIs and the maximum tenure the deduction is allowed is eight years.
* I have been advocating health insurance for long. And after a disastrous 2020, no one can deny the importance of health insurance. But your health insurance also acts in saving as a tax deduction. Under Section 80D, your family health insurance premium, up to Rs. 25,000, enjoys a tax rebate. If you pay your parents' health insurance premium, you enjoy another separate deduction of up to Rs. 25,000. If your parents are above 60 years, this upper limit goes up to Rs. 50,000. And if you yourself are above 60 and are paying your parents’ health insurance premium, the limit goes all the way up to Rs. 1,00,000.
* I guess the worst of times brings out the best in us. 2020 will be considered as the worst year in many of our lives. But this worst of times has brought the best out of humanity. Why I say this is because I can see a surge of donations pouring in from all over. Some of the donations you make qualify for 100 per cent deductions, for example, donations to the PM Relief Fund and the CM Relief Fund. Most of the renowned NGOs working for social upliftment qualify for a rebate of 50 per cent.
* If you have specially-abled dependents in your family and you are taking care of them, the tax man is considerate towards you. Under Section 80DD, the disabilities which are covered are: blindness, low vision, loco-motor disability, hearing impairment, mental retardation, mental illness, autism and cerebral palsy.
* You can claim deductions on the expenses of a disabled person’s treatment, nursing, training and rehabilitation.
* For premium paid on policies for these specific conditions.
* In case of 40 per cent disability, the tax-payer can claim a deduction of Rs. 75,000 and if it is 80 per cent, the higher limit is Rs. 1,25,000.