There are various provisions in the Income Tax Act, 1961, whereby, even though an individual has not made an investment for tax saving, it is possible to save tax in respect of expenses incurred by him.
Income Tax Saving for FY2019-20: We all are aware that someone has to invest in tax-saving instruments such as tax-saving fixed deposit, PPF, NPS, life insurance, health insurance etc whenever he wishes to save tax. Not many of us, however, are aware about the various tax provisions that can help us reduce our tax outgo without making any investment. Tax experts say that there are various provisions in the Income Tax Act, 1961, whereby, even though an individual has not made an investment for tax saving, it is possible to save tax in respect of expenses incurred by him.
# Once such avenue is to avail deduction under Section 80C of the I-T Act where maximum deduction of up to Rs 1,50,000 can be claimed in a financial year. The following expenses qualify for deduction under Section 80C:
1. Children’s Tuition Fees
The I-T Act provides for a deduction for the payment made towards tuition fees paid to any university, college, school or other educational institution situated in India. The deduction is available for the purpose of full-time education of any two children of the individual. However, any payment in the nature of development fees / donation or payments of similar nature are not covered under the purview of such deduction. Further, it has been clarified by the tax authorities that full-time education also includes play-school activities, pre-nursery and nursery classes.
# Apart from Section 80C, there are many other avenues for tax saving on expenses. We have stated a few of them below:
Most of us want to do our bit for the society and help people in need which is why we make contributions to various charitable organizations that support social causes. “The Act allows a deduction for donations made to organizations approved under Section 80G. A deduction of either 50% or 100% of the donation made can be claimed, subject to the conditions specified therein. In order to claim a deduction, the individual has to provide details like name, PAN and address of the donee, donation amount, etc. in the tax return form at the time of filing the return,” says Homi Mistry, Partner, Deloitte India.
3. Rent paid
Rent payment is yet another option for tax savings. If the employee receives a house rent allowance from his employer, then he can claim an exemption for the rent paid as per provisions stated in section 10(13A) of the Act. In case of other individuals and in cases where no house rent allowance is received by the employee, a deduction can be claimed as per section 80GG of the Act for the rent paid in respect of accommodation occupied by the individual for his own residence up to Rs 5000 per month (subject to prescribed conditions).
Most individuals make payment towards health insurance premium in order to cover medical expenses that might arise. Section 80D of the Income Tax Act provides for a deduction for health insurance premium paid by the individual for himself or his family or parents, subject to conditions and limits specified therein. For instance, an individual can claim up to Rs 25,000 per annum in respect of medical insurance premium paid for himself and his family (none of them being senior citizens).
Further, for cases of senior citizens where there is no health insurance, a deduction for the medical expenditure incurred by individual on himself/family/parents can be claimed subject to limits specified therein.
5. Interest on education loan
As per Section 80E, it is possible to claim a deduction for the interest paid on education loan obtained by an individual for purpose of pursuing higher education for himself or his relative; subject to conditions specified therein. “A deduction can be claimed without any limit, for a total period of 8 years, starting from the first year in which the individual starts repaying the loan and seven succeeding years thereafter or until the interest on loan is paid by the individual in full; whichever is earlier,” says Mistry.