As the financial year draws to a close, many individuals hurry to sort out their taxes. Despite this, numerous tax deductions in India frequently remain unnoticed. Although most taxpayers are familiar with well-known options such as Section 80C investments and the standard deductions for salaried individuals, many miss out on lesser-known deductions that could result in significant savings. Let's delve into these hidden opportunities that can help reduce your tax liability..
Medical Expenses deduction under Section 80D
Claiming deductions for medical insurance premiums under Section 80D is often forgotten. This deduction covers premiums paid for yourself, your family, and your parents, resulting in substantial savings.
For individuals under 60, the maximum deduction is ₹25,000. Senior citizens, aged 60 and above, can claim up to ₹50,000. If you pay for preventive health check-ups, remember that this cost is included in the overall limit. So, if you cover your family and elderly parents, your total potential savings can reach up to ₹75,000.
Home Loan Interest Under Section 24(b)
Many homebuyers are aware of the deductions available on principal repayment through Section 80C, but they often overlook the potential savings from mortgage interest payments. Section 24(b) allows for the deduction of home loan interest, enabling you to save up to ₹2 lakh annually. This is particularly advantageous in the early years of a home loan when the interest portion is usually higher than the principal.
For instance, if your annual interest payment amounts to ₹1.5 lakh, you can deduct the full amount, thereby lowering your taxable income. If your interest payment surpasses ₹2 lakh, you can still only claim ₹2 lakh for tax purposes, ensuring substantial tax savings.
Education Loan Interest under Section 80E
Investing in education usually yields benefits, and Section 80E of the income tax law allows you to take advantage of this. This section offers a full deduction on the interest paid for education loans, with no maximum limit.
If you secure a loan for higher education for yourself, your spouse, or your children, you can claim this deduction for up to eight years from the beginning of repayment. For example, if you pay ₹30,000 in interest each year on an education loan, you can deduct that entire amount from your taxable income annually.
Donations under Section 80G
Many taxpayers understand that donations can yield tax benefits but often overlook the specific deductions under Section 80G. Contributions to registered charitable organizations can qualify for deductions ranging from 50% to 100%, depending on the organization.
For instance, donating ₹10,000 to a government-approved charity may give you a ₹10,000 deduction, effectively reducing your taxable income. Always keep donation receipts and verify that the organization qualifies under Section 80G to ensure your contributions are deductible.
Rent Payment under Section 80GG
Young professionals and tenants living in rented accommodations often miss out on tax benefits due to lack of House Rent Allowance (HRA). Section 80GG enables you to claim a deduction for rent paid, capped at ₹5,000 per month or 25% of your total income—whichever is lower.
If your monthly rent payment is ₹10,000, but your total income is ₹2 lakh, you can only claim ₹5,000 as a deduction. Keeping payment receipts and proof of residence can make your deduction claim smoother.
Interest on Savings Account under Section 80TTA
If you have a savings account, you might qualify for a deduction on the interest earned under Section 80TTA. This section allows you to deduct up to ₹10,000 from interest earned on savings accounts held in your name.
For senior citizens, Section 80TTB further enhances this benefit by permitting deductions up to ₹50,000, applicable to interest earned on both savings and fixed deposit accounts. This means that if you earn ₹12,000 in interest as a senior citizen, you can still enjoy a deduction for ₹50,000, effectively saving on your tax.
Expenses Related to Freelancing
Freelancers and gig workers can save a considerable amount by claiming deductions on work-related expenses. Costs for supplies, travel, equipment, and a portion of your home internet bill may all be eligible for deductions.
For instance, if you spent ₹15,000 on office supplies and traveled ₹8,000 for client meetings, both amounts can be deducted, thereby lowering your taxable income significantly.
Standard Deduction for Pensioners
Retired individuals might not realize they can claim a standard deduction, just like salaried individuals. For the financial year, senior citizens can enjoy a standard deduction of ₹50,000 from their pension income. This deduction helps ease the tax burden for retirees who depend on a fixed income, allowing them to keep more of their earnings.
Wrapping Up
Many tax deduction opportunities often go unnoticed. By considering deductions such as medical expenses under Section 80D, home loan interest, education loans, and others, taxpayers can significantly reduce their tax liabilities.
It's worthwhile to evaluate your financial circumstances. You may be amazed at the savings you can achieve just by understanding the available deductions. Smart tax management can greatly enhance your financial well-being. Happy tax saving!
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