Commonly forgotten tax saving opportunities
Aggressive marketing by banks and insurers cause us to focus on investments that give us benefits under Section 80C. But there are many other routes to lowering your tax liability.
Salaried individuals always complain that the laws afford them very little leeway for lowering their taxable income. That’s not indefensible, but there’s more available than just the Section 80C all salaried individuals dwell constantly on this time of the year. There are several sections which will allow you to bring your tax liability down. Each section has its own attendant conditions which must be satisfied in order to claim the benefit. The following is a list of the ones you’re most likely to be able to make a claim under.
80D: For paying health insurance premium
Under this section, your family qualifies for a deduction of up to Rs15,000. If you are a senior citizen, it can go up to Rs20,000. If you are paying the premium of your parent’s health insurance, you can claim an additional Rs15,000, taking the maximum available deduction up to Rs35,000 under Section 80D.
80 TTA: Interest earned on savings balance
From this year onward, you can also claim a deduction of up to Rs10,000 on the interest your savings account earns. Let this not be an incentive to leave money lying around the bank, but it’s good that you can a deduction on this amount, too. This deduction does not extend to FD accounts.
80G: Donations to charitable organisations
Charitable institutions always mention that donations qualify for a tax deduction. This is available under Section 80G. These donations don’t necessarily give you a full deduction. Usually it’s closer to 50%. So you get a deduction of Rs5,000 on a donation of Rs10,000. However, many funds set up by government, such as National Children’s Fund, qualify for the full 100% deduction.
Section 80GG: House rent allowance
House rent allowance is a common component in a salary. An employer may include it in your package whether or not you actually rent. To qualify for this exemption, you need to be renting and not own any property within and outside India. If you pay rent to your parents, the amount would need to be reflected in your parents’ returns, too. The tax exemption you can receive on HRA is the lowest of these three: a) actual HRA you receive from your employer b) 50 per cent of your salary if you live in a metro or 40 per cent if you don’t and c) The actual rent you pay minus 10% of your salary. If you’re living on rent, but HRA isn’t part of your salary, you can still claim a deduction under Section 80GG. The maximum deduction available is, however, lower. You can receive no more than the minimum of Rs24,000, 25% of your total income, or the actual rent you pay minus 10% of your salary.
80GGC: Contributions to political parties
Any contribution you make to a political party or electoral trust will lower your taxable income.
80CCG: First-time equity investors
In 2012, the Finance Minister announced Section 80CCG to offer a tax break of 50% to first-time investors who invest up to Rs50,000. To qualify, however, your gross taxable income should be less than or equal to Rs10 lakh. So this deduction can only be used once.