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Tax adviser in India

Tax breaks not to be missed

Investing a little time and thought into process of filing Income tax return (ITR) can allow you to claim deductions you might have missed, while submitting your investment declarations.

  • Savings account interest: Your savings account is credited every quarter with interest on amount it holds at the end of quarter, this amount earned by you as interest is considered as part of your total income. However, the income tax (I-T) department, under Section 80TTA, allows exemption of up to INR 10,000 on this interest. Interest earned on post office savings will also be treated similarly.
  • Rent exemption without HRA: Many taxpayers make payment towards house rent but can’t claim deductions if your salary package does not include house rent allowance (HRA) as its component. Under Section 80GG, you can avail of the exemption benefit for the rent, provided you are not eligible for any housing benefit. You will not stand eligible for this break if you, your spouse or child owns the house you accommodate in. The exemption is limited to the least of: actual rent paid less 10% of total income; or INR 5,000 per month; or 25% of total income.
  • Exemptions for specified illnesses: Treatment of critical diseases like cancer, kidney failure or AIDS involves huge expenses, the income tax rules allow relief under Section 80DDB to tax-payers suffering from such diseases. Taxpayers can claim deductions if he / she suffers from any of the ailments viz.  ataxia, full-blown AIDS, malignant cancers, dementia cholera, hemiballismus, thalassaemia, chronic kidney failure, parkinson’s disease, haemophilia, motor neuron disease, dystonia, aphasia.
    They can claim a tax deduction of up to INR 40,000. If taxpayers is a senior citizen, the deduction can go up to INR 60,000 and the relief is enhanced to INR 80000, if the afflicted taxpayer happens to be a super senior citizen. However, if the expenses incurred on treatment of these critical ailments have been reimbursed by employers or through insurance policies, the taxpayers will not qualify for the deduction. If the reimbursement is partial, they will be eligible for the tax exemption on the balance amount.
  • Ancillary charges on home loan: Home loan borrowers just know that the chief benefits of this loan are the tax benefits it offers on the principal repayment (Section 80C) and interest paid (Section 24). However, very few know that also the processing fee paid is treated as interest and can be claimed as deduction under Section 24. The processing fees and other ancillary charges are considered as interest and qualify as exemptions.
  • Loans for down payments of house: Home loan-seekers often borrow from friends and relatives to arrange for the down payment. They either do not pay any interest on these loans or if they do, fail to claim deductions under Section 24, despite being eligible. Section 24 also covers interest paid on any loan taken for the purchase, renovation or reconstruction of a house. To claim exemptions, one should draw up a written loan agreement with the lender. The interest earned by the lender will be taxed as his income.
  • Deduction for disabilities: If a Person suffers from 40% disability (as certified by a medical authority), he/she can claim a deduction of up to INR 75,000 under Section 80U. Expenses incurred in respect of a disabled dependent will fetch a deduction of INR 75,000 under Section 80DD. In both cases, if the disability is more than 80%, the permissible amount for deduction is INR 1.25 lakh. This is a flat deduction.
  • Income of disabled child: If you make investments in the name of your spouse or minor child, the income earned from these investments is clubbed with your income under Section 64 and taxed as per the slab applicable to you. However, in case the child is disabled, income from investments made in his / her name will not be clubbed with the income of parents. The latter can use this provision to invest in taxable instruments like FDs and debt funds.
  • Setting off losses: If your investments resulted in losses during the previous financial year, you can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Short-term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains. Long term capital losses can only be set off against taxable long
    term capital gains.
  • Benefits for donations made: In most cases, deductions under Section 80G on donations made do not reflect in Form 16. So, you have to keep in mind that this exemption can be claimed while filing returns. Depending on where you have made contribution, you can claim a deduction of 50-100% of the donation made .But total deduction cannot exceed 10% of your total income. Cash donations are eligible for deduction if the amount exceeds INR 2,000

 

If you require any assistance in filing your personal income tax returns, corporate tax returns, income tax assessments, response to income tax notices, please contact AJSH & Co LLP. If you have any query regarding this Visit: www.ajsh.in .