Personal finance: Five sections that yield you tax benefits
Did you know that you could save on taxes by applying for deductions under 14 different sections of the Income Tax Act? If you are yet to invest in a way that would yield you tax concessions, here are the five simplest sections to target.
Are you among the frenzied lot rushing to complete your investment declarations — and tax-saving investments — before the March 31, 2021 deadline? Tax saving need not take a toll on your savings or dissuade you from planning investments. Sound financial planning involves appropriate tax planning along with taking care of your financials. Did you know that you could save on taxes by applying for deductions under 14 different sections of the Income Tax Act, including education loan, donations made to charity organisations, expenses on treatment of a disabled family member, among others? If you are yet to invest in a way that would yield you tax concessions, here are the five simplest sections to target.
Section 80C: Know what it includes
Instead of squeezing out of your savings to invest in tax-saving fixed deposits or insurance plans for five years or locking away money in equity-linked savings schemes (ELSS) for three years, there are other investments that qualify for this specific deduction. Basic education expenses of up to two children, contributions towards employee provident fund, life insurance premiums, the principal portion of the home loan, etc. are some of the options available to claim deduction under Sec 80C. For those who have girl children and who have opened a Sukanya Samriddhi Yojana, the contributions to that also qualify under Sec 80C.
Section 80GG: Claim HRA benefits even if not provided
Not all salaried people have house rent allowance (HRA) in their salary structure. Same is with self-employed people who believe that they can’t avail tax benefits under Section 80GG without an HRA component in their income. Both salaried and self-employed people can claim deduction up to ₹60,000 per year for the rent paid under Section 80GG. Akhil Chandna, Associate Partner, Grant Thornton Bharat, an integrated Assurance, Tax and Advisory firm, said, “Self-employed professionals, member of HUF [Hindu Undivided Family], or salaried individuals not in receipt of
HRA are eligible to claim deduction under section 80GG for the rent paid for house property. This deduction is allowed for INR 5000 per month and subject to the condition that the individual or spouse or HUF should not own any residential accommodation in the location where she/he is employed or carries on her/his profession. No rent payment proofs are required to be submitted to employer or any other person to claim such deduction of ₹60,000 every year under Section 80GG.” What this means is that if an individual does not receive HRA in their salary or income, they can still claim the tax benefit as long as they do not own any property anywhere in the country. They can even do so if they stay in a joint family as long as the house is not in their name. If the rent amount exceeds ₹60,000, then rent receipts are necessary, and if the amount exceeds ₹1 lakh, then the landlord’s PAN number will need to be submitted; the benefit however, will only apply on Rs. 60,000.
Section 24: Deduction beyond home loan interest
Did you know that you can claim deductions on expenses towards the home loan availed? Section 24 allows you to claim tax deduction up to ₹2 lakh on the interest towards home loan repayment. This deduction availability is over and above the ₹1.5 lakh deduction claimed under Section 80C of the Income Tax Act. However, the tax breaks are not confined to the interest paid on home loan from banks or non-banking finance companies. You can claim deduction on added expenses including the loan processing fees, foreclosure charges and other fees related to your home loan. To do that, make sure to collect the loan certificate from the lender. Those who have taken a personal loan, but have used the amount towards property acquisition can also invoke this section to avail the benefits.
Section 80D: Deductions on preventive check-ups expenses
Not many are aware that they can claim tax deductions up to ₹75000 on the amount expended on preventive health check-ups, premiums paid on health insurance plans, contributions to central government health schemes, and amount expended on medical treatment during a year. This deduction is over and above the ₹1.5 lakh under Section 80C of the Act. You can opt for preventive health check-up and preserve the bills to claim deduction under this section. Deduction is available on preventive health checkups including COVID-19 checks subject to ₹5000 in a year. CS Sudheer, founder & CEO, IndianMoney.com, a financial education company, says, “Many people in India think that they can claim tax benefits under section 80D of the Income Tax Act only for the Health Insurance Premium paid, but the reality is that there are more benefits. One can claim up to ₹1.25 lakh for the rehabilitation of a dependent who is a person with disability and up to ₹5000 for preventive health check-ups. Also, one can avail up to ₹40000 towards medical expenditures if they are resident citizens aged below 60 and up to ₹1 lakh if they are resident senior/super senior citizens.”
Section 80G: Care to share
Donations made to non-governmental organizations (NGOs) or government relief funds are eligible for tax deduction under Section 80G of the Income Tax Act. Depending on the entity to which you have donated, you can claim either 50% or the full amount of the money donated. While donating, make sure that a donation to the charitable institutions fall within the purview of Section 80G — this is usually mentioned outright by the NGO in question. Don’t forget to ask for a receipt as confirmation of the donation made.
