Tax saving is a continuous process. However, not everyone plans it well through the year. It often ends up being a last-minute rush. The last quarter of this financial year is here and if you have already reached out to the more popular investment options, let’s look at some of the lesser-known investment options that can give you a tax break.
Sometimes, there’s no need for you to invest more money. You can liquidate old tax saving investments which have completed the lock-in period and re-invest them further for tax benefits. Schemes such as PPF allow partial withdrawals upon finishing seven years from the time of investment. Tax-saving ELSS (Equity Linked Savings Scheme), on the other hand, comes with a three-year lock-in period, which can then be withdrawn entirely or partially to reinvest.
This is not as known as the deduction on school fees. Tuition fees for pre-school, i.e. pre-nursery and nursery, are eligible for deduction under Section 80C. However, the benefits are restricted to two children. So each parent can claim for deduction on the fees for two children.
If your parents are senior citizens, you can transfer funds to their fixed deposit (FD) accounts and earn tax-free interest up to Rs 50,000 in a financial year from each of their accounts. Your parents can also invest the transferred fund in other tax-saving schemes eligible for deduction under Section 80C such as SCSS to earn attractive ROI.
If you are buying a house on loan and you finance part/entire of the cost by borrowing from the parents, you can claim tax deduction benefits under Section 24B for the interest payment to your parents. However, take proper interest certificate from your parents as proof of interest payment.
If you live in a house owned by your parents, you can pay rent to them and claim HRA deduction to lower your tax liability. However, you do need to have a proper rent agreement and rent slips from your parents to avoid trouble in the event of any scrutiny from the IT department.
Medical expenses are only going up with time and you must have a medical insurance in place to take care of these expenses, especially when it comes to senior citizens. And if you are paying premium for their health insurance, you can claim a deduction of Rs 50,000 under Section 80 (D). If a senior citizen pays for the premium of his very senior parents, he/she can claim for an additional deduction of Rs 50,000.
This apart, if you are paying for the expenses on medicine for your senior citizen parents, you can avail deduction up to Rs 50,000 under Section 80 (D). However, the tax benefits in this case can only be availed if the expense is not covered under health insurance. Keep a record of all the bills and prescription safely for submitting proof.
(The writer is CEO, BankBazaar.com)