Taxes
This blog highlights five lesser-known income tax deductions under the Income Tax Act of 1961 that can help you reduce your tax liabilities. It covers deductions for rent, education loan interest, health insurance premiums, stamp duty and registration charges, and charitable donations, providing valuable insights into how to maximise your tax savings through strategic investments.
You may know about various tax benefits under the Income Tax Act of 1961 that can help lower your tax liabilities. While the Standard Deduction of ₹50,000 and Leave Travel Allowance (LTA) under Section 80C are commonly recognised, many additional deductions exist across different sections of the Act. By investing in tax-saving products from HDFC Bank, such as an Education Loan and Health Insurance, you can effectively claim these deductions and minimise your taxable income.
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Let’s take a look at some lesser-known Income Tax deductions.
If you are a salaried employee, you benefit from House Rent Allowance (HRA). However, if you are self-employed and do not receive an HRA, you can claim a deduction of the rent you pay under Section 80GG. The lowest value among the following three is what you can avail of under HRA.
Besides supporting your pursuit of higher education, an education loan can also offer tax benefits. Under Section 80E of the Income Tax Act, you can claim a deduction on the interest paid for an education loan. This applies to loans taken for the higher education of your spouse, children, or any student for whom you are the legal guardian. You can benefit from this deduction for up to eight years, beginning from the year you start repaying the loan.
Medical expenses can significantly impact your finances, but health insurance provides a vital safety net during emergencies and offers tax savings as well. Under Section 80D of the Income Tax Act, you can claim a deduction of up to ₹25,000 on the premium paid for your own health insurance. Additionally, if you pay the insurance premium for your parents, you can claim up to ₹25,000 if they are under 60 and up to ₹50,000 if they are over 60. If you are also above 60, you can claim a total deduction of up to ₹1,00,000 for premiums paid on your own and your parents’ Health Insurance policies.
Stamp Duty and Registration charges for home buyers
Stamp duty and registration charges must be paid when buying a house or property. If you have bought a house within the last financial year, the amount paid towards registration and stamp duty is deductible under Section 80C up to a maximum of ₹1,50,000.
It is often said that “the good you do comes back to you.” When you contribute to charity or donate, you can claim a deduction on the donated amount. However, the amount eligible for deduction for donations to certain specified institutions is limited to 10% of your total income, reduced by amounts deductible under other provisions of Chapter VI-A (such as Sections 80C and 80D). For instance, donations made to the Prime Minister’s Relief Fund or the Chief Minister's Relief Fund qualify for a 100% deduction. Conversely, donations to organisations like HelpAge India or Child Rights and You are eligible for a 50% deduction.
There are ample tax benefits apart from Section 80C deductions available under the Income Tax Act that you can avail of by investing in the right instruments. By knowing the various deductions and benefits available, you can save taxes while also earning returns. Therefore, the next time you file your Income Tax returns, look into such lesser-known deductions and save your taxes.
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You can claim additional tax benefits beyond the ₹1.5 lakh limit by investing in the National Pension System (NPS), with a maximum investment of ₹50,000 eligible under Section 80CCD (1B).
Besides Section 80C deductions, the Income Tax Act offers various other tax benefits through strategic investments. Understanding these deductions can help you save on taxes while generating returns. Remember that these benefits apply only to taxpayers opting for the old tax regime. Before filing your Income Tax returns, evaluate your total tax liability under both regimes and explore lesser-known deductions to maximise your savings.
Under Section 80C of the Income Tax Act of 1961, you can save tax by investing in Tax saving Fixed Deposits. Calculate using an FD calculator.
Disclaimer: *The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.