LESSER KNOWN DEDUCTIONS UNDER INCOME TAX ACT

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LESSER KNOWN DEDUCTIONS UNDER INCOME TAX ACT

The Income Tax Act provides for various income tax deductions which can be claimed at the time of filing of income tax returns.  The Income Tax Department encourages its citizens to make use of the income tax deductions, income tax exemptions and  rebates allowed under The Income Tax Act which help the tax payers to reduce their taxes in India.

As financial Year end is approaching for Indians, many business and salaried will be planning their tax liability and investment linked tax rebates. Deductions under section 80D and 80C are well known by majority of Indians and are very efficiently utilizing it too. However there are some unpopular deductions which taxpayers should pay heed to before 31st March otherwise one can miss those benefits.

  1. DONATION TO TRUST (Sec 80G)
  • Any taxpayer can claim this tax deduction for making donation towards an approved charitable institution.
  • Starting Financial Year 2017-18 any donations made in cash exceeding Rs 2000 will not be allowed as deduction. Therefore the donations exceeding Rs 2000 should be made in any mode other than cash to qualify as deduction u/s 80G.
NOTE :  Be careful about which entity you donate to as you will not be able to claim   any deduction on donations to entities which are not notified by the income tax department for this purpose
  1. DONATION TO POLITICAL PARTY ( Sec 80GGC)

You may not know this but supporting politics can also reduce the burden of your taxes. Any donation made to political parties is exempt from tax if

  • Contribution made by eligible assessee should not be in the form of cash. Donation made in any other form is eligible for deduction.
  • Donation made to an electoral trust.
  • Donation made to a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951).
  1. DEDUCTION FOR RENT PAID ( Sec 80 GG)

Usually HRA forms part of your salary and you can claim deduction for HRA. If you do not receive HRA from your employer and make payments towards rent for any furnished or unfurnished accommodation occupied by you for your own residence, you can claim deduction under section 80GG towards rent that you pay. Here are a few conditions that must be fulfilled –

  • You are self-employed or salaried
  • You have not received HRA at any time during the year for which you are claiming 80GG
  • You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of the office, or employment or carry on business or profession.
  • In case you own any residential property at any place, for which your Income from house Property is calculated under applicable sections (as a self-occupied property), no deduction under section 80GG is allowed.
  1. NATIONAL PENSION SCHEME

National Pension System (NPS) is a pension cum investment scheme launched by Government of India to provide old age security to Citizens of India. It brings an attractive long term saving avenue to effectively plan your retirement through safe and regulated market-based return. The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA).

  • Any individual who is Subscriber of NPS can claim tax deduction up to 10% of gross income under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.
  • An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961
  1. MUNICIPAL TAXES ON PROPERTY
  • If you are receiving rental income, 30% of the rental income will be subject to standard deduction and on rest 70% will be taxable.
  • Further you can deduct municipal taxes from the rental income provided if you have paid before 31 March. So without forgetting, if you want to claim deduction for municipal taxes from rental income you need to pay before 31 March
  1. INCOME TAX DEDUCTION FOR INTEREST ON EDUCATION LOAN ( Sec 80E)
  • An individual is allowed a deduction under section 80E for repayment of interest on loan taken for higher education of self, spouse or dependent children.
  • The deduction allowed under section 80E of chapter VI-A  is only for Repayment of Interest on Education loan  and not for the purpose of Repayment of Principal on Education loan.
  • The good part about this deduction is that there is no maximum limit on the amount that can be claimed as deduction.

By

Maitri Badani

(Article Assistant)

(Team SSRPN)

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