Income tax return filing is a process that is often completed mechanically.
However, investing a little time and thought into it can allow you to claim deductions you might have failed to while submitting your investment declarations. Read on to see how you can maximise your tax breaks.
1. Savings account interest
The balance in your savings account earns interest every quarter, which is considered part of your total income. However, the income tax (I-T) department, under Section 80TTA, allows exemption of up to Rs 10,000 on this interest. Interest earned on post office savings will also fetch a similar benefit.
2. Rent exemption without HRA
Many taxpayers shell out house rent but can’t claim deductions due to the absence of the house rent allowance (HRA) component in their salary. Under Section 80GG, you can avail of the benefit for the rent even if your salary package does not include HRA, provided you are not eligible for any housing benefit. You will not qualify for this break if you, your spouse or child owns the house you live in. The exemption is limited to the least of: rent paid less 10% of total income; or Rs 5,000 a month; or 25% of total income.
3. Breaks for specified illnesses
Keeping in mind the fact that treatment of ailments like cancer, kidney failure or AIDS entails huge expenses, the income tax rules allow relief under Section 80DDB to tax-payers suffering from such diseases.
However, investing a little time and thought into it can allow you to claim deductions you might have failed to while submitting your investment declarations. Read on to see how you can maximise your tax breaks.
1. Savings account interest
The balance in your savings account earns interest every quarter, which is considered part of your total income. However, the income tax (I-T) department, under Section 80TTA, allows exemption of up to Rs 10,000 on this interest. Interest earned on post office savings will also fetch a similar benefit.
2. Rent exemption without HRA
Many taxpayers shell out house rent but can’t claim deductions due to the absence of the house rent allowance (HRA) component in their salary. Under Section 80GG, you can avail of the benefit for the rent even if your salary package does not include HRA, provided you are not eligible for any housing benefit. You will not qualify for this break if you, your spouse or child owns the house you live in. The exemption is limited to the least of: rent paid less 10% of total income; or Rs 5,000 a month; or 25% of total income.
3. Breaks for specified illnesses
Keeping in mind the fact that treatment of ailments like cancer, kidney failure or AIDS entails huge expenses, the income tax rules allow relief under Section 80DDB to tax-payers suffering from such diseases.
Specified diseases under Sec 80DDB
Taxpayers can claim up to Rs 40,000 in deductions if he suffers from any of the following ailments
Ataxia, Full-blown AIDS, Malignant cancers, Dementia Cholera, Hemiballismus, Thalassaemia, Chronic kidney, failure Parkinson’s disease, Haemophilia, Motor neuron disease, Dystonia, Aphasia
They can claim a tax deduction of up to Rs 40,000. “If the person is a senior citizen, then the deduction can go up to Rs 60,000,” says Chetan Chandak, Head, Tax research, H&R Block. If the afflicted taxpayer happens to be a super senior citizen, the relief is enhanced to Rs 80,000. However, if the expenses incurred have been reimbursed by employers or through insurance policies, the taxpayers will not qualify for the deduction. If the reimbursement is partial, they will be eligible for the tax break on the balance amount.
4. Ancillary home loan charges
Home loan borrowers know that one of the chief benefits of this loan is the tax benefits it offers on the principal repayment (Section 80C) and interest paid (Section 24). However, few know that even the processing fee paid can be claimed as deduction under Section 24. The processing fees and other ancillary charges are considered as interest and qualify as exemptions.
5. Loans for down payments
Home loan-seekers often borrow from friends and relatives to arrange for the downpayment. They either do not pay any interest on such loans or if they do, fail to claim deductions under Section 24, despite being eligible. Section 24 also covers interest paid on any loan taken for the purchase, renovation or reconstruction of a house. However, you should draw up a loan agreement with the lender. The interest earned by the lender will be taxed as his income.
6. Deduction for disabilities
If a taxpayer suffers from 40% disability (as certified by a medical authority), he/she can claim a deduction of up to Rs 75,000 under Section 80U. Expenses incurred in respect of a disabled dependent will fetch a deduction of Rs 75,000 under Section 80DD. In both cases, if the disability is severe (more than 80%), the deduction is Rs 1.25 lakh. This is a flat deduction. The disabled should dependent on the taxpayer for maintenance.
7. Income of disabled child
If you have made investments in the name of your spouse or minor child, the income earned will be clubbed with your income under Section 64 and taxed as per the slab applicable to you. However, in case the child is disabled, income from investments made in his/her name will not be clubbed with the income of parents. The latter can use this provision to invest in taxable instruments like FDs and debt funds.
8. Setting off losses
If you lost money in investments during the previous financial year, you can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Short-term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains. Long term capital losses can only be set off against taxable long-term capital gains.
9. Benefits for donations made
Typically, deductions under Section 80G on donations made do not reflect in Form 16. So, this exemption can be claimed while filing returns. Depending on where you have contributed, you can claim a deduction of 50-100% of the donation made. However, it cannot exceed 10% of your total income. “If the donation was made in cash, no deduction is allowable if the amount exceeds Rs 2,000,” says Suresh Surana, Founder, RSM Astute Consulting Group.
Taxpayers can claim up to Rs 40,000 in deductions if he suffers from any of the following ailments
Ataxia, Full-blown AIDS, Malignant cancers, Dementia Cholera, Hemiballismus, Thalassaemia, Chronic kidney, failure Parkinson’s disease, Haemophilia, Motor neuron disease, Dystonia, Aphasia
They can claim a tax deduction of up to Rs 40,000. “If the person is a senior citizen, then the deduction can go up to Rs 60,000,” says Chetan Chandak, Head, Tax research, H&R Block. If the afflicted taxpayer happens to be a super senior citizen, the relief is enhanced to Rs 80,000. However, if the expenses incurred have been reimbursed by employers or through insurance policies, the taxpayers will not qualify for the deduction. If the reimbursement is partial, they will be eligible for the tax break on the balance amount.
4. Ancillary home loan charges
Home loan borrowers know that one of the chief benefits of this loan is the tax benefits it offers on the principal repayment (Section 80C) and interest paid (Section 24). However, few know that even the processing fee paid can be claimed as deduction under Section 24. The processing fees and other ancillary charges are considered as interest and qualify as exemptions.
5. Loans for down payments
Home loan-seekers often borrow from friends and relatives to arrange for the downpayment. They either do not pay any interest on such loans or if they do, fail to claim deductions under Section 24, despite being eligible. Section 24 also covers interest paid on any loan taken for the purchase, renovation or reconstruction of a house. However, you should draw up a loan agreement with the lender. The interest earned by the lender will be taxed as his income.
6. Deduction for disabilities
If a taxpayer suffers from 40% disability (as certified by a medical authority), he/she can claim a deduction of up to Rs 75,000 under Section 80U. Expenses incurred in respect of a disabled dependent will fetch a deduction of Rs 75,000 under Section 80DD. In both cases, if the disability is severe (more than 80%), the deduction is Rs 1.25 lakh. This is a flat deduction. The disabled should dependent on the taxpayer for maintenance.
7. Income of disabled child
If you have made investments in the name of your spouse or minor child, the income earned will be clubbed with your income under Section 64 and taxed as per the slab applicable to you. However, in case the child is disabled, income from investments made in his/her name will not be clubbed with the income of parents. The latter can use this provision to invest in taxable instruments like FDs and debt funds.
8. Setting off losses
If you lost money in investments during the previous financial year, you can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Short-term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains. Long term capital losses can only be set off against taxable long-term capital gains.
9. Benefits for donations made
Typically, deductions under Section 80G on donations made do not reflect in Form 16. So, this exemption can be claimed while filing returns. Depending on where you have contributed, you can claim a deduction of 50-100% of the donation made. However, it cannot exceed 10% of your total income. “If the donation was made in cash, no deduction is allowable if the amount exceeds Rs 2,000,” says Suresh Surana, Founder, RSM Astute Consulting Group.