One
of the most popular section when it comes to income tax saving is 80C.
People are aware of 80C and use this section fully when it comes to
Income tax deductions. But many times taxpayer forgot other available
income tax deductions which can reduce their tax burden. In this post,
we will take a look at less known income tax deductions which can be
used to save more tax.
Save Tax through your Family Member
One
of the simplest ways to save tax is through your family member parents,
in-laws, wife, and children. You might be surprised that how it works?
Let me explain, in this method you need to give away a portion of your
fund to the family member as a gift or loan.
If
you have any close family member or relatives who fall in NIL or lower
tax bracket then you can save taxes by gifting/transferring your
investment in their name. You need to open a separate income tax file on
their name. Tax implication arising due to the above is explained
below.
Example
1 – Let’s consider the example of businessmen or self-employed who are
earning 10 Lakh from a business. He can pass on his profit/earning to
his children/wife. He can show this as salary income for running a
business. His taxable income will be reduced by that amount. His
children (major)/Wife needs to file separate income tax return and pay
taxes as per tax slab. If an amount is less than taxable limit liability
will be NIL.
Example
2 – Let’s consider an example of a married couple where a husband is
salaried and earning 10 Lakh per annum as salary income. Wife is a
homemaker. Husband decided to give 2 Lakh as a gift to his wife. Wife
makes an investment in the tax-exempted instrument such as ELSS, PPF
etc.
As
the husband is giving 2 Lakh, his taxable income is not reduced to 8
Lakh. Husband needs to pay taxes on full amount 10 Lakh (Salary Income).
Wife will be exempted from tax on receiving a gift. Any income earned
via investment on will be totally her income and will not be taxed under
clubbing provision.
Download the Automated Income Tax Form 16 Part A&B which can prepare at a time 50 Employees Form 16 Part A&B for F.Y.2018-19 [ Who are not able to download the Form 16 Part A from the Traces Portal, they can use this Excel Utility for F.Y.2018-19]
Section 80GG Deduction on Rent Paid
Under
section 80GG, an individual can claim a deduction for the rent paid.
This is applicable only if you are not getting HRA from your employer.
This section is applicable only for self-employed or salaried. You will
be allowed to claim up to Rs.5000 per month or 25% of total income or
actual rent paid in excess of 10% of total income (whichever is less).
Section 80TTA and 80TTB for bank interest
Section
80TTA of the income tax act offers a tax deduction on interest income
earned from deposits or saving bank account. Interest income earned from
savings account up to Rs.10000 is deductible from the gross income. A
new section 80TTB is introduced this year. The new section is applicable
to senior citizen. As per 80TTB up to Rs.50000 is allowed to be
deducted from the gross income of senior citizen.
Section 80G for Charitable Deduction
Suppose
you have made a donation to the charitable organization or to the
certain relief fund in last financial year. You can claim the deduction
of this amount under section 80G and save more tax. There are a certain
set of organizations/institutions donation to them offers 100%
deduction. You can take advantage of this section.
Interest on Loan has taken for higher education under 80E
Income
tax section 80E allows you to claim benefit on interest paid for
education loan. If you have taken an education loan don’t forget to make
claim for interest deduction. This deduction is allowed for a maximum
eight years or till the interest is fully paid.
Section 80DDB for Medical Treatment
An
expense incurred for the treatment of specified diseases such as AIDS,
Cancer, Thalassemia etc can be claimed for income tax deduction under
section 80 DDB. The maximum amount permissible under this section is
Rs.40000. The limit for 80DDB for the senior citizen is Rs.60000. You
will need certificate Form 10-I from a qualified medical practitioner
for this.
Interest payment for Home Loan of Second House
If
you have taken a home loan for buying a second house you can claim up
to 2 Lakh per year towards interest payment. This as per income tax
section 24b. If you have rented a second house you need to declare
income from that. If second house is rented or not rented you need to
declare one house as deemed rented and other as self-occupied.
A premium for Health Insurance under 80D
You
can claim deduction up to Rs.25000 for health insurance premium paid
(for self, spouse, and children). If health insurance is taken for
senior citizen payment you can claim deduction up to Rs.30000.
Amount Invested in NPS under section 80CCD
Most
of the people are not aware of section 80CCD of NPS. You can invest up
to 1.5 in NPS under section 80C to avail tax benefits. Apart from this
you can invest additional Rs.50000 in NPS and get income tax deduction
under section 80CCD. This benefit is available for investment in NPS
only.
