Not just Sec 80C, the I-T Act, 1961, provides for deductions under various other sections. Here?s a lowdown on how you can reduce your tax outgo
While most taxpayers are aware about exemptions under Section 80C of the Income Tax Act, 1961, there are host of other sections where one can get exemptions and save tax. Under Section 80C, R1 lakh is reduced from the total income for calculating tax and a host of saving instruments are covered, such as EPF, PPF, five-year bank deposits, life insurance premiums and even principal payment of home loans and tuition fees for two children studying in India.
Some of the important deductions that a taxpayer should look at are under Sections 80D, 80U, 80G, 80GG, 80E and 80DDB, which can significantly lower the tax burden.
Medical ? Section 80D
Under Section 80D of the Income Tax Act, 1961, the medical premium amount will qualify for deduction of up to R15,000 per annum and an additional amount of R20,000 per annum for senior citizens. This year, one can also claim deduction of up to R5,000 for preventive health check-ups of self, spouse, dependent children or parents. Also, for the purpose of deduction under Section 80D, payment can be made by any mode, including cash, in respect of any sum paid on account of preventive health check-ups and by any other mode other than cash in in all other cases.
Under Section 80DD, treatment of handicapped dependents qualifies for deduction. To claim deduction, one has to furnish a certificate from a government hospital practitioner in the prescribed format. A further deduction of R15,000 is also allowed for buying a health insurance policy for parents.
Similarly, under Section 80DDB, costs incurred for treatment of specified illnesses can be deducted For individual assesses less than 65 years, a deduction limit of R40,000 is applicable. For a senior citizen, the limit is R60,000 and a certificate will have to be taken from a specialist working in a government hospital, which will be the proof for the specified ailment.
Similarly, a deduction of R50,000 can be claimed by person with disability and R1 lakh can be claimed by a person with a severe disability.
Interest on housing loan ? Section 24
The equated monthly instalments on housing loans have two components ? interest and principal ? and both these can help the taxpayer minimise the tax outgo and build a long-term asset. Under Section 24 of the Income Tax Act, up to R1.5 lakh can be deducted from your taxable income as interest repayment for a self-occupied house.
However, this deduction is not available if the house is still under construction, or if you have not taken possession of the house. The principal paid is eligible for deduction under Section 80C, which has a limit of R1 lakh. Moreover, one-time stamp duty charges paid for registration also get tax exemption under Section 80C of the Income Tax Act, 1961.
Donations ? Section 80G
From this financial year, if you are giving donations to any charitable institution, trust or society and claim tax benefits, ensure that you do not pay over R10,000 in cash. The Budget for 2012-13 has added a new clause to sub-Section (5C) of Section 80G of the Income Tax Act, where no deduction will be given to the taxpayer on donation of any sum that is over R10,000 unless the amount is paid by any mode other than cash.
Similarly, for donations made for scientific research or rural development made to research associations, universities, colleges or other associations under Section 80GGA, the deductions will be available of any sum that is over R10,000 unless the amount is paid by any mode other than cash. Depending on the purpose of donation, the quantum of deduction could be 100% or 50% of the donation amount. For example, donations eligible for 100% deduction are for Prime Minister?s National Relief Fund, National Defence fund, etc. Donation eligible for 50% deduction are Prime Minister?s Drought Relief Fund, National Children?s Fund, donation to charitable trusts and societies notified by the tax department.
In the case of donations to private trusts, the actual amount of donation would be 50% of the qualifying amount. However, the deduction under Section 80G cannot exceed one?s total taxable income.
Education Loan ? Section 80E
By taking an education loan for higher studies, one can claim deductions on the entire interest amount. The deduction on the interest paid can be claimed for a loan taken for education of not only the child, but also for self and spouse. Only the interest paid is deducted from the income and one can claim the benefit for eight years in a row, beginning from the year when the interest payment starts. However, the deduction is given only to an individual and not to a Hindu Undivided Family.
At present, both public and private sector banks offer education loans to students in the age group of 16 to 35 years. While availing loans below Rs.4 lakh, an applicant does not have to give any security and a third-party guarantor or security amount, but for loans above R4, one has to give a third-party guarantee. For all practical purposes, the guarantor of the loan could be the applicant’s parent, working sibling or even spouse.
Non-80C deductions available
* Section 80DD: A total of R40,000 for expenditure on the treatment of a handicapped dependent relative
* Section 80G: Donation to certain funds and charitable institutions
* Section 80U: Deduction of R40,000 to an individual who suffers physical disability
* Section 80DDB: Deduction of expenses on ailments such as AIDS, cancer and neurological diseases
* Section 80E: Interest paid on education loan for higher studies
