The month of July is here and the biggest worry you may have is to file your income tax returns and declare your investments and all your taxable income for the assessment year 2013-14 to save on the amount of tax you have to pay.
If you’re a salaried taxpayer, you must have invested in the most commonly known tax saving instruments prescribed under Section 80C of the Income Tax Act, such as a life insurance or a Unit-Linked Insurance Plan (ULIP); contribution to a retirement benefit plan or pension plan by an insurance company or a mutual fund; contribution in Employees Provident Fund (EPF); National Savings Certificates (NSC); Equity Linked Savings Scheme (ELSS); 5-year tax-saving bank FDs; Public Provident Find (PPF) and Senior Citizens’ Savings Scheme.
However, do you know there are various other instruments than Section 80C prescribed in the existing income tax Act where you can invest to save you income tax outgo. Let’s have a look at these lesser known tax saving provisions that you can make use of.
This section deals with Rajiv Gandhi Equity Saving Scheme (RGESS) that may make you as a resident individual eligible to claim additional deduction of up to Rs 25,000 or 50% of the amount invested in equity shares, whichever is lower. This deduction is however subject to certain conditions, for instance the benefit is available only to new retail investors whose gross total income does not exceed Rs 12 lakh.
This section allows deduction of Rs 50,000 in respect of expenditure incurred on medical treatment, (including nursing), training and rehabilitation of a handicapped dependent relative. The handicapped dependent should be a dependent relative suffering a permanent disability (including blindness) or mentally retarded, as certified by a specified physician or psychiatrist. However, if the disability is severe, the deduction can go upto Rs 1 lakh per year.
This section is applicable to resident individual/resident HUF and allows exemption on medical expenses for treatment of specified disease for self or dependents upto Rs 40,000 or the amount actually paid, whichever is less. For senior citizens, the exempted amount can go upto Rs 60,000.
An education loan can not only finance your higher studies it can also help you save tax. Section 80E of the income tax Act, applicable to individuals only, deals with deduction for interest paid on education loan. In case you have taken an education loan for higher education, entire amount of interest (not principal) is deductible. However, the deduction on education loan is eligible for claim only when you start repaying and is available up to eight years, or until the interest is paid completely, whichever is earlier.
This section was introduced in the Income Tax Act in the 2013 Budget in order to provide additional deductions to persons borrowing home loan during the FY 13-14 (AY 14-15). Under this section, you can claim deduction of Rs 1 lakh or the interest amount payable, whichever is less on the first home loan. If the interest paid by you is less than Rs 1 lakh during FY 13-14, then the balance would be carried forward and may be claimed in FY 2014-15. This deduction will be over and above the deduction of Rs 1.5 lakh allowed for self-occupied properties under Section 24B of the Income Tax Act.
However, there are certain conditions that need to be met to claim this deduction, for instance the loan shouldn’t exceed Rs 25 lakh; the value of the property shouldn’t exceed Rs 40 lakh and the individual shouldn’t own another property as on the date of sanction of this loan. Besides, the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2013 and ending on the 31st day of March, 2014.
If you are interested in being a part of charity and philanthropic activities, it’s good for you! For, Section 80G of the income tax Act allows you to claim deduction for the amount donated to approved institutions upto either 100% or 50%. However, donation made in kind such as food, clothes, medicine etc, are not eligible for deductions.
This section of the income tax Act deals with deduction for rent paid. In case you’re a self employed individual or in case of a salaried individual, who does not have a House Rent Allowance (HRA) component, then you may claim a deduction for the rent paid by you. Under this section, deduction is allowed in least of (1) Rs 2000 per month, (2) 25% of total income and (3) Rent paid less 10% of total income.
If you make donations to political parties, you can claimed the amount for tax deduction as per Section 80GGC. This section however is applicable to all assessees other than Indian companies. You can claim 100% of donation for deduction under this section.
This section allows for deduction of Rs 50,000 to a taxpayer with severe disability. The individual claiming a deduction under this section is required to furnish a copy of the certificate issued by the medical authority along with the income tax return to claim the deduction. Persons suffering from following disabilities are eligible for this deduction, namely, autism, cerebral palsy, blindness, low vision, leprosy, hearing impairment, loco motor disability, mental retardation and mental illnesses.
Sections 54 & 54F
You must be aware of the fact that capital gain from sale of assets such as property, shares, bonds, gold form part of your total income and is taxable. However, Section 54 of the income tax Act provide provisions for tax deductions on long term capital gains from selling of residential property. Sec 54F covers assets other than residential property. The deduction under Section 54 is however subject to certain conditions. Under this section, if a residential property is sold after 3 year of purchase then an individual taxpayer or HUF can claim tax exemptions on the capital gains if the capital is invested in either of the following manners: a new residential property is bought within 2 years or a new residential property is constructed within 3 years of sale of the old property.
If you can’t buy a new residential property or are not able to construct a new residential house within the due period, you can invest the sale proceeds in the Capital Gains Account Scheme (CGAS), a type of FD scheme specifically for long term capital gains from a property. You can keep the amount in CGAS for 3 years, which is the minimum period for availing LTCG tax exemption.
Section 10 of the income tax Act allows for multiple tax exemptions. This section provides for Leave travel allowance (LTA) that is exempt to the limit specified in the individual's salary. Besides, under this section, income gained from agriculture is fully exempt from tax if it is the only source of income in the financial year. This section also exempts any income (maturity amount and death claims) from an insurance policy. Additionally, as per the section, gratuity amount, leave encashment amount gained after retirement or leaving the job and dividends from mutual funds or stocks are tax free.