Dayandand, a college professor is on the lookout for optimizing his taxes for FY 2020-21. The 80C bucket is already overflowing with his contribution to EPF and repayment of his housing loan. Since he is in the higher slab rate, he would like to know if there are any more tax saving avenues. Does he?
It’s just two more weeks for this financial year to end. We all keep ranting about the amount of taxes we pay. But if we really want to act smart by optimizing taxes, then we need to move fast.
When it comes to tax saving “80C” is the favorite stop! While this section could help a taxpayer who is in the lower tax slab, the ones in the higher tax brackets need to look farther.
Health insurance :
The Income Tax Act 1961, allows an assessee (Individual/HUF) to claim deduction of the amount paid towards health insurance of self and family vide sec 80D (25K). It also allows a deduction for contributing towards health insurance of parents (50K).
Interest payable on loan taken for purchasing Electric Vehicle :
For taxpayers who are contemplating on buying electric vehicles before the financial year end, it might be good to know that up to Rs 1,50,000 (interest) can be claimed as a deduction in a financial year.
Donations :
A lot of us make it a habit to contribute to a good cause each year. Why not take the tax benefit which is a by-product of “being the good Samaritan”? Sec 80G of the income tax act provides for deductions that can be claimed for donations to approved charitable institutions. One needs to have a stamped receipt from the institution or trust to which the donation is made in order to claim this deduction.
Other deductions available from existing fund outflow
Interest on educational loan: Student who has availed an educational loan (from financial institutions) to pursue higher education can take a tax benefit on the interest component of the loan under section 80E. The benefit can be availed by the student or by the parent depending on who repays the loan.
80TTA – Interest on savings bank account: Interest earned on savings bank account balances are taxable as income from other sources at regular slab rates. But one can claim deduction of up to Rs. 10,000 in a financial year under section 80TTA for any interest earned on SB a/c. Sec 80TTB is the counterpart for senior citizens and the limit is Rs. 50,000 in a financial year.
Interest on housing loan :
Interest on housing loan repaid can be claimed as a deduction under sec 24b, while computing income from house property. For a self-occupied property there is a limit of Rs. 2,00,000 in a financial year, but there is no such limit for a “Let out” property.
Apart from sec 24b, an assessee can claim an additional benefit of interest on housing loan of upto Rs. 1,50,000 in a financial year for an affordable housing unit, subject to conditions (80EEA).
How can we help you?
Various clauses from the Income Tax Act may be simplified in online contents. But most of the time, it requires professional help in identifying suitable route for specific instances. Similar to nurturing and taking care of personal health, it is important to also keep a tab on one’s financial health. We at Chockalingam Unnamalai & Associates, can help you understand the pros and cons of various choices you make in the context of personal taxation. You can bank on us for a stress free tax filing and related compliances.
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