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 More Tax – Use these less known Income Tax Deductions
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 separate income tax file on their name. Tax implication arising due to above is explained below.
Example 1 – Let’s consider example of businessmen or self-employed who is earning 10 Lakh from business. He can pass on his profit/earning to his children/wife. He can show this as salary income for running 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 amount is less than taxable limit liability will be NIL.
Example 2 – Let’s consider example of married couple where husband is salaried and earning 10 Lakh per annum as salary income. Wife is homemaker. Husband decide to give 2 Lakh as gift to his wife. Wife makes investment in tax-exempted instrument such as ELSS, PPF etc.
As 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 gift. Any income earned via investment on will be totally her income and will not be taxed under clubbing provision.
Also Read – Income Tax Calculator Download FY 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 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 education loan don’t forget to make claim for interest deduction. This deduction is allowed for maximum eight years or till the interest is fully paid.
Also Read – 25 Common Income Tax mistakes to avoid while filing ITR
Set off of Capital Loss Against Capital Gain
Another important provision which can be used to save tax is setting off a capital loss against capital gain. Suppose you incurred losses by selling assets (property, shares etc.) in the financial year and at the same time, you have made gain by selling other assets. You can set adjust losses made from the profit. This provision allows you to do adjustment of long-term capital gain against long capital gain losses and short-term gain against short-term losses.
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.
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.
I hope lesser known income tax deduction mentioned above will help you in saving additional tax for you. If you are using any other method of saving tax which is not included above feel free to share it via comment section.