Rental to parents for medical examination, 6 useful tax deductions you can claim
The deadline for filing the income tax return for the 2022-23 tax year or the 2021-22 fiscal year is approaching soon. An individual must file a tax return or ITR if their total income exceeds the basic tax exemption limit in a fiscal year. Taxpayers have the ability to claim various deductions under the Income Tax Act 1961 to reduce their tax liability. While you should be aware of popular deductions such as investments in the public provident fund or PPF under Section 80C, there are also various other lesser-known income tax deductions.
Take a look at the lesser known income tax deductions you can take advantage of
1) Income tax deductions for contributions to pension funds
If a person contributed to an insurance company annuity plan in fiscal year 2021-22, to receive a pension, they can claim a deduction for the amount paid from total gross income. Section 80 CCC allows taxpayers to claim deductions of up to Rs 1.5 lakh for the purchase of retirement products. Resident and non-resident individuals contributing to pension funds are eligible for this benefit.
Taxpayers can claim additional benefits of 50,000 for their National Pension Scheme (NPS) contributions under Section 80CCD. Until 2015, taxpayers could claim an income tax deduction of up to Rs 1 lakh on contributions made to the NPS. In the 2015 budget, the central government increased the maximum amount allowed to invest in the NPS to Rs 1.5 lakh from Rs 1 lakh. A new subsection 1B has also been introduced to provide an additional deduction of up to Rs 50,000 for contributions made by any individual under the NPS. Thus, taxpayers can now claim a total deduction of Rs 2 lakh (Rs 1.5 lakh under Section 80C and Rs 2 lakh under Section 80CCD) for investing in NPS.
2) Income tax deduction for savings account interest
Do you have multiple savings accounts? Then you can claim a deduction of up to Rs 10,000 under Section 80TTA of the Income Tax Act 1961, for interest earned in a financial year on the account of ‘saving. The deduction can be claimed for a) savings bank accounts, b) cooperative bank accounts, C) postal savings plans.
3) Section 80D: Deduction for medical insurance and preventive health check
Demand for health insurance has accelerated sharply after the Covid-19 pandemic. If you purchased medical insurance for yourself, your partner, or your dependent children or relatives, you may be able to claim a deduction from insurance premiums under Section 80D. Individuals can claim up to Rs 25,000 for the payment of medical insurance premium for themselves, their spouse or their dependent children or parents. If the parents are elderly, a deduction of Rs 50,000 can be claimed during the financial year 2021-22.
Similarly, each individual can claim a maximum of Rs 5,000 in a financial year under Section 80D for the payment of a preventive medical check-up for himself or his family members, including including parents and dependent children.
It should be noted that this tax deduction is available in addition to the Rs 1.5 lakh deduction under Section 80C.
4) Income tax deductions for paying rent to parents
Taxpayers may qualify for the Housing Allowance Exemption (HRA), even if they pay rent to their parents under Section 10 (13A). To benefit from this deduction, HRA must be part of the salary package. The housing allowance you will be entitled to will be the lesser of the following – a) The HRA amount received as salary, b) 50% of salary if you are renting a house in Delhi, Mumbai, Chennai or Kolkata. For those staying in a rented house in non-metropolitan cities, the HRA will be 40% of salary, c) Paid rent — 10% of salary (basic component + high cost allowance). It should be noted that the rental contract and the rent receipts are mandatory to benefit from this deduction. On the other hand, parents can deduct property taxes and claim a standard deduction on rental income.
5) Income tax deductions for donations under Section 80G
If taxpayers made a donation during the financial year to an approved organization or charity, an income tax deduction may be claimed on the amount donated. Contributions paid by check, draft or cash are eligible for this deduction. For donations above Rs 2,000, taxpayers must use any other mode of payment apart from cash, to claim the deduction. There is no maximum limit for the deduction that can be claimed for donations made under Section 80G.
Donations are eligible for a 100% or 50% deduction with or without restriction. However, taxpayers should be aware that not all non-governmental organizations (NGOs) or charities are eligible to grant donors a deduction under Section 80G.
Section 80 GGA allows individuals to claim a deduction for scientific research or rural development, while Section 80GGB and Section 80GGC relate to donations to political parties.
6) Income tax deduction for the purchase of an electric vehicle under section 80EEB
Introduced in the 2019 budget, section 80EEB allows a deduction for interest paid on loans for the purchase of electric vehicles. A maximum deduction of up to Rs 1.5 lakh is available under Section 80EEB. Any interest payment above Rs 1,50,000 can be claimed as a business expense.
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