Most taxpayers invest in many places to save their tax.
In the last quarter of the financial year most taxpayers invest many places to save their tax. Generally people opt for popular options such as Equity Linked Savings Schemes (ELSS), Tax-saving Fixed Deposit, Public Provident Fund, ULIP etc. On the expenditure front, people’s information is limited to home loan interest, principal repair, EPF contribution, term insurance premium and health insurance. Let’s know about some options and expenses that will save you tax and not many people are aware of them.
Interest earned from savings account
Savings accounts usually have a lower interest rate, but some private sector banks and small finance banks offer higher interest rates on deposits in a savings account. Currently, the rate of interest on savings account is up to 7.5 percent. Higher interest rates and higher liquidity, such as benefits, make it a good choice for investors for their emergency funds and surplus. Most taxpayers are not aware that you get tax benefits on savings account. Under Section 80TTA, there is no tax on interest of Rs 10,000 annually, while it will be higher according to your tax slab.
Hire deduction for those not taking HRA
Employees who are availing HRA can claim tax deduction under section 10 (13A) on payment of rent made by them. Employees who are not covered under section 10 (13A), can claim deduction under section 80GG for rent. The taxpayer will also have to submit section 10BA to avail the deduction.
Tuition fees paid for child’s education
Under section 80C, tax deduction can be claimed up to Rs 1.5 lakh for the expenses incurred for school / tuition fees for a maximum of 2 children. In this, apart from university, school, fees for nursery, pre-nursery and play-school are also covered. However, payment of tuition fees is not included for your education or the education of your spouse. Similarly, no tax deduction will be available on the payment of fees for coaching the child or at educational institutions or private tuition located outside India. In addition, some fees like uniform fees, admission fees, transport fees, development fees and late fees are not included in section 80C.
Benefits of HRA exemption on payment of rent to parents
It is a misconception that people who are earning HRA but live with parents, cannot avail tax deduction within section 10 (13A). However, the reality is that they can still claim tax deduction on HRA if they pay tax to the parents. All they need to do is show the owner-tenant relationship through the rent agreement and submit the rent receipts. This will not affect the tax liability of your parents as they will be able to take 30% standard deduction on the net annual value of their property.
Senior citizen received deduction on interest in deposit
Under section 80TTB, senior citizens can take tax deduction of up to Rs 50,000 on the interest received on deposits made in banks, post offices and co-operative banks. This includes savings account, term deposit and recurring deposit.
Reduction on treatment of certain diseases
Taxpayers within section 80DDB can take deductions for themselves and those dependent on chronic renal failure, AIDS, malignant cancers, haemophilia, thalassaemia and various neurological diseases mentioned in Rule 11DD of the Income Tax Act. However, you must have a doctor’s prescription to claim deduction. For a person who needs treatment, if he is a senior citizen, then the maximum limit for this is Rs 1 lakh and for others Rs 40,000.
(By: Naveen Kukreja, CEO & Co-Founder, Paisabazaar.com)