For many people, tax planning is all about how to save taxes. However, there are various sections under the Income Tax Act of India in which you can claim specific expenses as deductions. To reduce taxes it is not only important to invest but it is important to properly arrange financial affairs as well. To reduce the tax burden for its citizens, the Indian Government each year through the budgetary proposal introduces legitimate ways to save on tax.
It is important for every taxpayer to know which all expenses are allowed as a deduction for tax planning purposes. Let us discuss a few of the common expenses that can be claimed as deductions under various sections of the Income Tax Act in India.
Children Tuition Fees
Taxpayers are allowed to claim tuition fees paid on two children’s education in a Financial Year. Under section 80C of the Income Tax Act India, you can claim up to Rs.1.5 lacs as a deduction towards the actual tuition fee paid for dependent children. You can claim tuition fees paid for two dependent children. However, both husband and wife have a separate limit. Therefore, if both are working, each parent can claim to benefit for up to two children.
Stamp duty and registration charges paid on the purchase of a new house
Stamp Duty and Registration Charges are major cost components of a new house purchase. It’s around 8% to 10% of your new house cost. To incentivize taxpayers, the Government has included stamp duty and registration charges as an eligible deduction from the total income under section 80C of the income tax act.
Expenses incurred on specified diseases like AIDS, Cancer or other neurological diseases
Under section 80DDB a taxpayer can claim an amount spend on medical treatment of self or dependent on specified diseases like AIDS, Cancer, or other neurological diseases. The point to remember here is the condition to receive such tax benefit is that there is no medical reimbursement by any insurance company or employer for this amount. The maximum limit on tax benefit is as follows:
| The maximum limit on tax benefit | A.Y. 2019-20 onwards till date |
| Individual below < 60 Age | 40,000 |
| Individual above > 60 Age but below < 80 Age | 100,000 |
| Individual above > 80 Age | 100,000 |
The amount allowed as a deduction is the least of the above-specified amount or actual amount spent.
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Medical Expenses incurred on expenses on disabling dependent
To provide relief to a taxpayer who has a disabled dependent or dependent with a severe disability can seek a tax deduction for expenses on medical treatment or amount deposited under a prescribed scheme for the maintenance of the dependent. Under section 80 DD for F.Y. 2020-21, if the disabled dependent is suffering from 40% or more disability, a maximum limit on amount can be claimed as a deduction is Rs. 75,000/- and the same for a disabled dependent who is suffering from severe disability i.e. 80% or more disability, a maximum limit on amount can be claimed as the deduction is Rs. 125,000.
Deduction for rent paid by an individual
Section 80GG can be claimed as a deduction for rent paid subject to some condition.
You get the lowest of the following values as tax-free deduction
- Rs. 5000 per month
- 25% of total income (total income is calculated excluding capital gains and other deductions)
- Actual rent exceeding 10% of income (income would be calculated excluding capital gains and other deductions)
Even if you are a self-employed professional, businessman, or salaried individual you can claim 80GG benefit. The most important condition to claim benefit under this section is you should not have received HRA benefit during the years and you must pay rent for the house you reside in. There are few more important conditions to be fulfilled to get the benefit under section 80GG. The amount is rather small but a rupee saved is a rupee earned.
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