Some deductions available under the Income-Tax Act which are little known. Instead of blindly rushing into new investments, it may be a good idea to be aware of some of them.
The month of March is typically when Indian taxpayers scramble to invest into ‘tax saving’ schemes. While we are generally aware of common deductions for contributions to LIC, PPF, medical insurance premium, donations, etc., there are some other deductions which are already available under the Income-Tax Act. Instead of blindly rushing into new investments, it may be a good idea to be aware of some of them.
1. Additional deductions available u/s 80C, 80CCC and 80CCD(1) under overall cap of Rs 150,000
a) Payment of school tuition fees for children
School tuition fees paid for maximum two children are eligible for deduction under Section 80C under the overall cap of Rs 1,50,000. Furthermore, both parents can separately claim legitimate expenditure incurred by them. Please note that only tuition fees qualify for this deduction and not other incidental charges.
b) Stamp duty paid upon purchase of house property
In addition to housing loan repayment qualifying for deduction u/s 80C, stamp duty paid at the time of purchase of house property is also eligible for deduction.
c) Contribution to pension account
NPS contribution by an individual is deductible capped to 10% of salary (for salaried individuals) or 20% of gross total income (for others) within the overall cap of Rs 150,000. An additional deduction of Rs 50,000 u/s 80CCD(1B) is available for amount deposited by taxpayer into the NPS scheme. Contributions to Atal Pension Yojana are also covered.
2. Employer’s contribution to pension account
In addition, employer’s NPS contribution is deductible up to 10% of salary.
3. Expenditure on preventive health check-up
Expenditure on preventive health check-up is eligible up to Rs 5,000, in addition to the deduction available for medical insurance premium. However, the overall limit is Rs 25,000 or 50,000 (applicable for regular/senior citizen beneficiaries, as the case may be). Further, amount paid on medical expenditure for senior citizens is allowed only if they are not covered under any health insurance scheme.
4. Higher Education Loan interest
Interest paid on an education loan taken for higher studies or vocational courses qualifies for deduction u/s 80E. Such deduction is also available for such a loan taken for spouse or children or legal ward. This deduction is allowed for maximum eight years or till the loan is repaid, whichever is earlier.
5. Deduction u/s 80GG in respect of rent paid
If you are not receiving HRA, deduction of maximum Rs 2,000 per month or 25% of total income (whichever is less) is available u/s 80GG in respect of rent paid on accommodation.
6. Interest earned from savings account and deposits
Interest earned from savings bank account is exempt up to Rs 10,000 for individuals/HUF and up to Rs 50,000 for resident senior citizens in India.
7. Deduction on contributions made to political parties
Monetary contribution (other than cash) made by a taxpayer to any political party or an electoral trust is eligible for deduction u/s 80GGC.
It is said ‘ignorance is bliss’, but certainly not in this case. It is wise to pause and check whether one really needs to make any further investments purely for ‘tax saving’ purposes.
(By Ishita Sengupta, Partner–Personal Tax, PwC. Rajvi V Shah, Assistant Manager, also contributed to this article)