Here Are 5 Lesser-Known Income Tax Deductions
You might be aware of different tax benefits under the Income Tax Act, 1961 that can help you reduce your tax liabilities. When you invest in some specific instruments, you can avail of deductions and exemptions.
Tax benefits like Standard Deduction of Rs. 50,000 and Leave Travel Allowance (LTA) under Section 80C of the Income Tax Act are well known. However, there are many more deductions available under different sections of the Income Tax Act that you can claim to reduce your taxable income to the best possible limit. You can claim these deductions by investing in HDFC Bank tax-saving products such as Education Loan, Health Insurance and others.
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Let’s take a look at some lesser-known Income Tax deductions.
- Deductions on rent
If you are a salaried employee, you benefit from House Rent Allowance (HRA). However, if you are a self-employed individual and do not receive an HRA, you can claim a deduction of the rent you pay under Section 80GG. The lowest value among the following three is what you can avail of under HRA.
- Rs 5,000 per month or
- 25% of the total income or
- actual rent paid (-) 10% of annual income.
- Deductions for interest on education loan
Apart from facilitating higher studies, an education loan can also help you save taxes. Under Section 80E, you can claim a deduction of the interest paid on an education loan. You can avail of this on loan for the higher education of your spouse, children or a student of whom you are a legal guardian. This deduction can be availed for a period of eight years starting from the year you start paying the loan.
- Deduction on premium paid on health insurance
Medical expenses can cause a significant dent in your budget. Health insurance helps by acting as a cushion during a medical emergency and save taxes too. Under Section 80D, you can request a deduction of the premium paid towards medical insurance up to a value of Rs 25,000. You can also claim a deduction on the insurance premium of your parents to a value of Rs 25,000 if they are below the age of 60 and Rs 50,000 if they are above 60 years of age. Moreover, if you are above the age of 60, you can claim up to Rs 1,00,000 on the premium you pay for your own and your parents’ Health Insurance policies.
- Stamp Duty and Registration charges for home buyers
Stamp Duty and Registration charges need to be paid when buying a house or property. If you have bought a house within the last financial year, the amount paid towards registration and stamp duty is deductible under Section 80C up to a maximum of Rs.1,50,000.
- Deductions made towards donations
It is said that ‘the good you do comes back to you’. Whenever you contribute towards a charity or make a donation, you can claim a deduction on the donated amount. The amount eligible for deduction in respect of donations to some specified institutions have a limit of 10% of the total income as reduced by amount deductible under other provisions of Chapter VI-A (Sec. 80C, 80D, etc.) For instance, if you donate towards the Prime Minister’s Relief Fund, the Chief Minister's Relief Fund, etc., you can claim 100% deduction. However, money given to establishments like HelpAge India or Child Rights and You is eligible for 50% deduction.
There are ample tax benefits apart from Section 80C deductions available under the Income Tax Act that you can avail of by investing in the right instruments. By knowing the various deductions and benefits available, you can save taxes while also earning returns. Therefore, the next time you file your Income Tax returns, look into such lesser-known deductions and save your taxes.
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- Investments in National Pension Scheme (NPS)
You can claim tax benefit over and above the Rs 1.5 lakh limit by investing in NPS. The maximum amount that can be invested is capped at Rs 50,000. The benefit is available under Section 80CCD (1B).
There are ample tax benefits apart from Section 80C deductions available under the Income Tax Act that you can avail of by investing in the right instruments. By knowing the various deductions and benefits available, you can save taxes while also earning returns. Remember, these deductions are only available for taxpayers opting for the old regime. Take into consideration your total tax outgo under each regime before making a decision. Therefore, the next time you file your Income Tax returns, look into such lesser-known deductions and save your taxes.
* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.