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Common Investment & Expenditure which Give you Tax Benefit
In order to get deductions in income tax you can either make expenditure or invest money. But sometimes due to lack of knowledge we make unnecessary new investments to get deductions which could easily be availed by already made expenditure.
Here are some of the expenditures which if made by you can make you eligible for the deduction in income tax: –
Life insurance premium
Under section 80C if you are an individual or Hindu undivided family and if you pay life insurance premium for yourself, spouse, children or any member of Hindu undivided family then you can avail a deduction under this section. Even renewable premiums paid for keeping the life insurance policy active qualifies for deduction under the section.
As per section 80C if a person pays tuition fees for education of Tuition children in a school, college or university in India then expenditure to maximum of 1.5 lakh can be taken as deduction, but it is allowed only for maximum two children. It is one of the easiest ways to reduce tax burden.
Prepayment of home loan
As per section 80C, a person can take a deduction for the payment made for repaying the loan taken for purchase or construction of house from any bank of financial institution.
However, there is a restriction that the person cannot sell the house within 5 years from gaining possession, if it is sold then the deduction claimed earlier will be revoked and taxable in the year of sale
Maximum deduction allowable under section 80C is 1.5 lakhs.
Interest on home loan
On paying the interest on loan taken for the purpose of purchase or construction of a house, deduction can be claimed for the interest paid.
Firstly, the person can take the deduction under section 24 to the maximum of 2 lakh under “income from house property” head and then he can take an additional deduction under section 80EEA for 1.5 lakh if house is brought under affordable housing category and fulfills the specified criterias.
Interest on loan for higher education in India or abroad
If an individual takes loan for the higher education purpose in India or abroad then interest paid for a period of eight consecutive years starting from the year in which the assessee starts interest will be allowed as a deduction under section 80E.
The loan should be taken for education of self, spouse, children or any student for whom Assessee is a legal guardian. The loan should be taken from any bank, financial institution, any Charitable trust or NGO.
Health insurance premium
Deduction under section 80D is available when individual or HUF spends on medical insurance premium, Central government health scheme, preventive health checkups or medical treatment.
The expenditure in any of these should be done for-
In case by individual- shelf, spouse, parents and dependent children
In case of HUF – any member of HUF
But there are conditions:
- that the mode of payment it should be other than cash but cash payments are allowed for preventive health checkup
- the aggregate payment for preventive health checkup of self, spouse dependent children and parents cannot exceed 5000
If you have made donations to the political party or electoral trust then you can avail 100% deduction. But yes, the donation should not be made in cash.
If you have made donations for scientific research or rural development and you don’t have income under the head PGBP, then donations of more than 10,000 in a mode other than cash will be 100% eligible for the deduction under section 80GGA.