Take Advantage of Lesser Known Income Tax Deductions

Lesser Known Income Tax Deductions

1. Children's Tuition Fee

   Deduction under section 80C is available for tuition fee paid for children. Section 80C has an overall limit of Rs.1.5 lakh and this does not include donations
    

2. Deduction for Disabilities

   If a taxpayer is an individual with a disability, she/he can claim a deduction of Rs.75,000/- under Section 80U. In case of severe disability, the deduction can go up to Rs. 1.25 Lac. If you are taking care of a dependent with disability, you can claim an amount of Rs. 75,000/- against treatment, nursing and training of the dependent. The dependent could be your spouse, child, parent or sibling. In case of a dependent with a severe disability, this amount can be Rs. 1.25 Lac. It's essential to submit a medical certificate issued by a Government Hospital for claiming this benefit.
    

3. Tax Relief for Specified Illnesses

   If the taxpayer is suffering from a severe illness like cancer or AIDS, she/he can claim a deduction under Section 80DDB of an amount of Rs.40,000/-. In the case of senior citizens, the deduction is Rs. 60,000/- and for very senior citizens, it is Rs. 80,000/-. If the taxpayer is looking after a dependent with a severe illness, she/he can claim a deduction for the same as well.
    

4. Deductions on Savings Account Interest

   Most taxpayers tend to overlook this deduction. There is a deduction of Rs. 10,000/- from savings bank deposits which qualifies under Section 80TTA.
    

5. Home Loan Processing and Legal Fee

   It is very well known that interest paid on home loans is deductible under Section 24. Many are not aware that processing, legal fees and prepayment charges are also allowed as deductions under the same section.
    

6. Deduction on Interest Paid on Personal Loan Taken for House Purchase

   Interest paid on any personal loan taken for the purpose of the purchase of a house is also deductible. Interest paid on the loan taken from friends and relatives is eligible for the deduction.
    

7. Rebate for Interest Paid on Loan for Home Renovation

   It is a well-known fact that interest paid on a loan for the purpose of renovation of your house can be claimed as a deduction of up to Rs. 30,000/- under Section 24B.
    

8. Rent Deduction Even Without HRA 

   If you are not eligible for an HRA but are paying rent, you can claim a deduction of Rs. 5,000/- a month under Section 80GG. Although, this deduction has a few conditions that need to be net for it to be applicable.
    

9. Reinvest to Save Long Term Capital Gain Tax 

   Many investors take advantage of this deduction. According to Section 54 of the Income Tax Act, an individual can claim exemption for taxation when they buy a residential property after selling off another. However, they must purchase the new residential property either one year prior to or two years after the date of sale or transfer. When constructing a new house, the time frame allotted is within three years of the date of sale. In addition, the Budget of 2017 revised the holding period of long-term capital to two years.
    

10. Set-off Short Term Capital Losses 

    On the sale of mutual funds, property or stock, if there is any capital loss incurred, then the same can be set off against the capital gains incurred under the same category. In case of short term losses, it can be easily set off against long term gains. This deduction is applicable even for subsequent years after the occurrence of loss. It is important to note that long term loss can only be set off against long term gain.
     

11. Donations

    You may have contributed funds to NGOs during the COVID-19 pandemic to assist people who had lost their source of income or those in need of medical treatment. You may have also made donations in the past during natural calamities. Such donations qualify for an income tax deduction in India under Section 80G, provided that it is made to central government-approved organisations.
     

12. Preventive medical checks

    Preventive health check-ups refer to multiple medical evaluations that can assist in reducing the risk of potential diseases. Such tests can help detect early-stage infections, underlying diseases, etc. Preventive check-ups are eligible for an income tax deduction under Section 80D. This section allows you to save up to Rs 5,000 on the amount you spend on a preventative check-up for yourself or your spouse, dependent children, and parents.
     

13. Senior citizens' medical expenses

    There are certain situations in which, despite your best efforts, you might not be able to buy medical insurance for your parents. The insurer could deny your insurance application, for instance, if your elderly parents have a medical condition that necessitates regular hospital visits or admissions. However, you can still claim a tax deduction if you are paying for your parent's medical bills. Section 80D allows to avail tax benefits of up to Rs 50,000 on the amount spent on the treatment of senior citizen parents.
     

14. Education loan

    The high education costs in India might have encouraged you to apply for an education loan for your children’s education. But do you know these loans come with tax benefits? The interest paid on the education loan availed for self, spouse, or children qualifies for tax deduction under Section 80E. There is no prescribed ceiling for the deduction amount. This deduction is allowed for a period of 8 years from the year in which the interest was first repaid.
     

Also Read: Guide to e-Filing or Online Filing your Income Tax Returns
 
It is advisable to NOT make investment choices solely on the basis of income tax deductions. Instead, make investment choices based on your needs and requirements. However, as far as possible, do try and ensure compatibility with the available Income Tax Deductions. Lastly, whatever you do, please ensure to file your income tax returns on time to avoid paying any interest or penalty.
 
Disclaimer: This post was first published on 17th February 2017 and has been updated for the latest information, freshness, and accuracy.