Whether you receive a hike in your salary or get a good return on your investments, with more earning comes more tax. However, you can decrease your tax burden every financial year. So, irrespective of whether you file your own taxes or have a chartered accountant to do it for you, read on to know more about a few uncommon Income Tax sections that are often overlooked, but will help reduce your taxable income.
1. For the medical insurance premium you pay for your parents
Under Section 80D of the Income Tax Act, you can claim deductions against the premium payments you make on medical insurances for your parents. You can claim a maximum of Rs.25,000 if they are less than 60 years of age or Rs.50,000 in case both of them are above 60 years of age.
An additional deduction brought to action from FY 2015-16, allows you to claim Rs.5,000 for payments made towards preventive health check-up. This section also allows you to claim up to Rs.25,000 for the medical insurance premium you pay for you, your spouse, and children. So, if you pay the premium on your parent’s policy then you are eligible to claim a cumulative deduction every financial year.
2. For the interest earned on your savings deposit
If you have a savings deposit account then you are sure to receive a yearly interest on your savings too. The frequency at which you receive the interest depends on the financial institution. But irrespective of that you can claim an exemption of up to Rs.10,000 towards interest on savings under Section 80TTA of the Income Tax Act. You can claim this deduction for all savings account held in a bank, post office or cooperative society.
3. For the differently abled
Section 80U of the Income Tax act allows tax deductions for individuals with 40% or more specified disabilities. These taxpayers can claim a deduction of up to Rs.75,000. In case of severe disability such as autism, mental disability, cerebral palsy, etc., you can claim a deduction of up to Rs.1,25,000.
To proceed with a claim, you will have to furnish a valid disability report or certificate issued by a government authority. Apart from this, in case you take care of a disabled individual then you can claim the same amount of exemptions under Section 80DD of the Income Tax Act. Here, the disabled can be your spouse, children, parents, or any member of the Hindu Undivided Family.
4. For interest paid on personal loan that you use to fund home purchase or construction
In general, personal loans do not fetch you tax exemptions and are regarded as an additional income. However, in case you use the funds from your personal loan to purchase a home or for the construction of a residential property, then you are eligible to claim tax deductions under section 24 of the Income Tax Act.
You can claim an exemption of up to Rs.2 lakh for your self-occupied property. The only condition applicable here is that the property must be completed in 5 years. If its completion exceeds this time limit, then the exemption quantum drops to Rs.30,000. On the other hand, if you are not occupying the property yourself, there is no limit on how much you can claim as an exemption, regardless of the status of construction.
5. For the yearly rent you pay in absence of HRA
In most cases, if you are salaried, then your employer will calculate your yearly rent obligations as HRA and will allow for a tax liability reduction. However, if your employer does not offer you HRA exemptions or if you are self-employed then under Section 80CG of the Income Tax Act you can claim rent reductions from your total taxable income. You can claim a minimum of Rs.5,000 per month as rent in this regard, provided you or your immediate family who make the HUF unit do not claim tax benefits for any other property in the country.
Armed with these tips, proceed to plan your finances in advance so that you save it big for the next financial year.
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