Check these deductions in Income Tax Act before filing your tax returns
Let’s dive into the often-mystifying world of Indian income tax. As a seasoned observer of our financial landscape, I’ve seen countless individuals navigate the annual tax-filing ritual. And year after year, a common thread emerges: while we all diligently claim the well-trodden paths of Section 80C and 80D, a treasure trove of lesser-known deductions often goes untouched. It’s like leaving money on the table, simply because we’re either unaware or find the tax jargon too daunting.
But fear not! My aim here is to shed light on these hidden gems of the Indian Income Tax Act, 1961. These aren’t just obscure clauses for a select few; many of them apply to common scenarios you might find yourself in. So, before you hit that ‘submit’ button on your income tax return this year, take a moment to explore these provisions. They could well be the key to unlocking significant tax savings you never knew were possible.
Unearthing the Untapped: Lesser-Known Income Tax Deductions You Shouldn’t Miss
When it comes to filing your income tax returns, the popular sections like 80C for investments (think EPF, PPF, life insurance premiums, ELSS) and 80D for health insurance are practically household names. They’re the first stop for most taxpayers looking to reduce their taxable income, and rightly so, given their broad applicability. However, the Indian tax framework is far more nuanced, offering a plethora of other deductions that, while perhaps less talked about, can be equally impactful. The unfortunate reality is that many of these are overlooked, often due to a simple lack of awareness or the perceived complexity in understanding their nuances.
It’s high time we moved beyond the usual suspects and explored the deeper alleys of the Income Tax Act. Here’s a curated list of those often-overlooked sections that could significantly pare down your tax liability:
1. Section 80GG: Your Rent, Even Without HRA
This is a provision often missed by a significant chunk of our working population. While most salaried individuals are fortunate enough to receive House Rent Allowance (HRA) as part of their salary structure, what about those who don’t? Think self-employed professionals, freelancers, or even salaried employees whose companies don’t offer HRA. If you fall into this category and are paying rent, Section 80GG is your saving grace.
This section allows you to claim a deduction for the rent paid, up to a maximum of ₹5,000 per month or 25% of your total income, whichever amount is less. The primary condition? You (or your spouse or minor child) must not own a house in the same city or location where you reside or work. It’s a fantastic provision for those who, despite paying hefty rents, might feel left out of the HRA benefit.
2. Section 80DDB: Relief for Critical Illness Treatment
Dealing with a critical illness is a taxing experience, both emotionally and financially. Thankfully, our tax laws offer some respite. Section 80DDB provides a much-needed deduction for expenses incurred on the medical treatment of specified diseases for yourself or your dependents. This includes serious ailments like cancer, Parkinson’s disease, chronic kidney failure, and more.
The deduction limit is quite generous: up to ₹40,000 for individuals, and a substantial ₹1,00,000 for senior citizens (those aged 60 and above). To claim this, you’ll need a valid prescription for such medical treatment from a specialist, clearly stating the disease. It’s a crucial section that acknowledges the significant financial burden critical illnesses place on families.
3. Section 80DD: Supporting a Disabled Dependent
Empathy is woven into the fabric of our society, and this extends to our tax laws as well. Section 80DD offers a deduction for expenses incurred on the care, medical treatment, training, or even life insurance premiums for a dependent with a disability. This provision is a boon for families caring for individuals with physical or mental disabilities.
The amount of deduction varies based on the severity of the disability: ₹75,000 for normal disability (40% or more but less than 80% disability) and a higher ₹1.25 lakh for severe disability (80% or more disability). You’ll need a medical certificate from a government hospital or a specified medical authority to claim this. It’s a powerful way the tax system supports caregivers.
4. Section 80U: For the Taxpayer with a Disability
While Section 80DD focuses on dependents, Section 80U is specifically for the taxpayer themselves if they have a disability. This section provides a flat deduction, regardless of the actual expenses incurred. This means if you, as the taxpayer, are living with a disability, you are entitled to this benefit.
Similar to 80DD, the deduction amount depends on the degree of disability: ₹75,000 for those with 40%-80% disability and ₹1.25 lakh for those with severe disability (80% or more). All you need to claim this is a disability certificate issued by a medical authority as prescribed by the Income Tax Act.
It’s important to understand the subtle yet significant difference between these two provisions: Section 80DD provides tax deductions to family members or kin of the taxpayer who is caring for a person with a disability, whereas Section 80U provides deductions directly to the individual taxpayer with a disability. Both are vital, but for different beneficiaries.
5. Section 80E: Investing in Education, Getting a Return on InterestEducation is an investment, and our tax laws recognise this. Section 80E is a fantastic provision for individuals (or parents) who have taken an education loan for higher studies. The best part? You can claim a 100% deduction on the interest paid on this loan. This benefit is available for up to 8 years or until the full repayment of the loan, whichever comes first.
What’s truly remarkable about Section 80E is that there is no upper limit on the deduction amount. Whether the higher education was pursued in India or abroad, the interest paid on the loan is fully deductible. This can lead to substantial savings, especially in the initial years of loan repayment when the interest component is higher.
6. Section 80EE: The First-Time Homebuyer’s Advantage (A Historic Provision)
Buying a first home is a dream for many, and the government has, at various times, introduced incentives to make it more accessible. Section 80EE was one such provision specifically for first-time homebuyers. While it applies to a specific period, it’s worth checking if you qualify.
If you purchased your first home between April 1, 2016, and March 31, 2017, and the property value was less than or equal to ₹50 lakh with a sanctioned loan amount of ₹35 lakh or less, you could claim an additional deduction of ₹50,000 annually on the interest paid on your home loan. This deduction was over and above the general deduction available under Section 24(b).
7. Section 80EEA: Promoting Affordable Housing
Building on the spirit of 80EE, Section 80EEA was introduced in Budget 2019 to further boost affordable housing. This section offers an additional deduction of up to ₹1.5 lakh for interest paid on loans taken for affordable housing.
To be eligible, the stamp duty value of the property should be ₹45 lakh or less, and the loan must have been sanctioned between April 1, 2019, and March 31, 2022. It’s crucial to note that you cannot claim this deduction if you are already claiming a deduction under Section 80EE. This provision has been instrumental in making homeownership more attainable for many.
8. Section 80TTB: A Sweet Deal for Senior Citizens’ Interest Income
Our senior citizens, who have contributed immensely to our nation, deserve special consideration. Section 80TTB is a testament to this, allowing senior citizens (aged 60 years or above) to claim a deduction of up to ₹50,000 on their interest income.
This isn’t just about fixed deposit interest; it encompasses interest earned from various bank deposits, including savings accounts, fixed deposits (FDs), and recurring deposits (RDs). Many often remember to account for FD interest but completely overlook the interest earned on their savings accounts, which can add up significantly over a year. This section provides a valuable avenue for senior citizens to reduce their tax burden on their hard-earned savings.
9. Section 10(14): Special Allowances – Don’t Leave Them on the Table!
This section, often governed by Rule 2BB, outlines various special allowances that are tax-exempt. While they might seem like small amounts individually, they can collectively add up to meaningful savings over a financial year. It’s surprising how many in the workforce are simply unaware of these.
For instance, if you’re an employee with a disability, your transport allowance might be eligible for exemption. Parents, pay attention: the children’s education allowance (₹100 per month per child, for up to two children) and hostel allowance (₹300 per month per child, for up to two children) are often forgotten. These seemingly minor exemptions can make a tangible difference to your take-home pay. Always check your salary slip and talk to your HR department to ensure these are being correctly applied.
10. Section 24(b): The Home Loan Interest Deduction (Beyond 80C)
While many taxpayers club their principal repayment under Section 80C, the interest paid on a home loan falls under Section 24(b). This is a crucial distinction. For a self-occupied property, you can claim a deduction of up to ₹2 lakh on the interest paid on your home loan.
The beauty of this section is that it’s independent of Section 80C. So, even if you haven’t claimed any principal repayment under 80C, you can still claim this interest deduction. The primary conditions are that the loan must have been taken for the purchase or construction of the house, and the construction must be completed within five years from the end of the financial year in which the loan was taken. This can lead to substantial annual savings for homeowners.
A Final Word of Advice
As Bharat Dhawan, managing partner, Forvis Mazars in India, aptly points out, the Indian Income Tax Act is replete with provisions designed to ease the tax burden. The key is knowledge and meticulous planning. These lesser-known sections, though not as celebrated as 80C or 80D, can significantly impact your tax liability.
My strong recommendation is to always review your financial situation and expenses thoroughly before filing your returns. Don’t assume you know all the deductions available to you. A little research, or perhaps a conversation with a qualified tax advisor, can uncover these hidden benefits. After all, every rupee saved on taxes is a rupee earned, and in today’s economic climate, every rupee counts. So, go forth, explore these possibilities, and make the most of what our tax laws offer!
