With inflation catching the headlines too often have you been worried about expenses draining your income? The Income Tax Act offers some reason to lift your spirits amidst the gloom of expenses. There are more than a handful of expenses that help you slash taxes.
If your landlord has increased the rent the ‘n’ th time and zooming real estate prices have been keeping your dream house out of your reach then the rising rent has a silver lining of tax saving. You can claim the lowest of – a. The actual HRA, b. 40% of the basic pay (50% for metros) or c. rent paid less 10% of basic pay.
Home Loan repayment
Home loan equated monthly installments (EMIs) that eat a major pie of your income, find a special deduction under loss from house property for the interest portion. Under Section 24 (b), you can claim up to Rs. 2 lakhs for the first house. There is no ceiling for the second home loan. The good news is that if your spouse is a joint owner then the tax benefit is available to both.
The principal amount repaid toward the home loan can be claimed under the Section 80 C, where the overall cap is Rs 1.5 lakh.
Education expenses for your dependent children can be claimed under the overall umbrella of section 80C up to Rs. 1.5 lakh. Remember only tuition fee paid to recognized universities, colleges, schools or institutions can be claimed. The course has to be a full-time course and not private coaching classes. Transportation, food and other miscellaneous expenses cannot be claimed.
Though you cannot claim the principal amount repaid for the education loan, you can claim a deduction for the interest portion under section 80E. There are no upper limits on the interest amount that can be claimed. However, the entire interest portion can be claimed only for the first eight years of the loan taken for self, children or spouse.
Caring for the disabled
To reduce the burden of tending to a disabled family member, the Income Tax Act provides for a relief of Rs. 75,000 (minimum 40% disability) or Rs. 1,25,000 (above 80% disabled) depending on the severity of the disability suffered by the dependent. Expenses such as medical treatment, nursing, rehabilitation or training and purchase of specified insurance covers can be claimed under section 80DD. One can claim these expenses for deduction if your disabled spouse, children, parents or siblings are dependent on you.
Conditions covered here include, blindness (or low vision), leprosy, hearing impairment and mental retardation, locomotor disability, mental illness, autism, cerebral palsy or multiple disabilities.
Disability deduction for self instead of a dependent can be claimed under section 80U, for the same conditions as those mentioned for dependents. The limits that govern section 80U too are same as section 80DD.
Expenses on treating diseases:
No one can share the pain of your loved ones, but taxation is one relief area if your dependents are undergoing treatment for diseases such as Dementia, Dystonia Musculorum, Deformans, Motor Neuron Disease, Ataxia, Chorea, Hemiballisums, Aphasia, Renal Failure, Parkinson’s disease, Malignant cancers or Hematological Disorders. Expenses incurred on treating spouse, children or parents are eligible for deduction of up to Rs. 40,000 (Rs. 60,000 if senior citizen) under section 80 DDB. However, costs shared by insurer or employer are deducted and the actual expenses can be claimed.
Health-related expenses in terms of purchasing insurance cover and conducting health tests are available for deduction as per section 80D. You can save up to Rs. 25,000 spent on purchasing medical insurance cover for yourself. The total deduction can go up to Rs. 55,000 (Rs 25,000 self, Rs 30,000 parents) if you are purchasing a health cover for yourself as well as senior citizen parents. The limit for parents stays at Rs. 25,000 if they aren’t senior citizens.
Preventive medical tests conducted for your spouse, dependent children, parents and self during a year can be claimed under section 80D up to a maximum of Rs. 5,000. However, this deduction is available within the overall ceiling of Rs. 60,000, which includes medical insurance.
Your philanthropic deeds find a place in the Income Tax Act. The amount donated to some funds, charitable institutions all come under section 80G, while money gifted for the purpose of scientific research or development and rural well-being are governed by section 80GGA. In case you opt for the organizations under section 80GGA you get a tax benefit on 100% of the amount donated and if the institution is created under section 80G then you will get benefit on 50% of the donation amount.
Deduction isn’t permitted on the amount donated in excess of 10% of gross salary.
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