Bangalore: Tax season is here and people are busy filing their returns. Even though most people look for ways to lower their taxes, they often tend to overlook a few, which can help them save a lot of money. Sanjeev Sinha of Economic Times puts forth a list of 10 most over-looked tax deductions, which are as follows –
1) Deductions for Charity –
Tax deductions can be made on charitable deeds but these are operated only under certain categories. The 2 broad classifications of tax deductions for charity are – (A) and (B), both under the Section 80G of the IT Act, 1961. In category (A) – the total amount of money given in charity is deducted from the assessee's gross income. In category (B) – only half of the money donated is eligible for tax deductions. Category (A) is a better option for us to save more money. Areas under category (A) include - Prime Minister's National Relief Fund, Prime Minister's Armenia Earthquake Relief Fund, National Foundation for Communal Harmony, Maharashtra Chief Minister's Earthquake Relief Fund, National Illness Assistance Fund and others. Areas under category (B) include - Jawaharlal Nehru Memorial Fund, Prime Minister's Drought Relief Fund, Indira Gandhi Memorial Trust, Rajiv Gandhi Foundation, National Cultural Fund and others.
2) Deductions on Medical Expenses –
Tax deductions are allowed for medical expenses, again within certain limits. Medical expenses are eligible for tax deductions under Section 80D. Mediclaims for certain diseases are also covered under Section 80DDB. A few special diseases covered under this act are – neurological diseases, malignant cancers, AIDS, chronic renal failure and hematological disorders. A maximum of 
40,000 is deducted for regular people and 60,000 for senior citizens. Our family members are also eligible for this deduction, only if they are completely dependent on us. However, one would require a certificate (10- I) from specialist doctors for these deductions.
House Rent Allowance (HRA) are eligible for tax deductions. HRA is covered under Section 80GG of the IT Act. According to this, all people, both salaried and business people, are eligible for this. Deductions can be claimed for both, furnished and non-furnished houses. The details of this deduction are – minimum of 2,000 per month or 25 percent of one’s total income, the lesser amount being considered. Deductions are available for only those houses which are located in municipal areas, though most prominent cities are a part of these areas. This claim can be availed by filling out Form 10-BA.
4) Disabled People –
There are 3 categories for availing tax deductions under disability. First, section 80DD provides a deduction of 50,000 for a disabled person undergoing medical treatment. Second, 75,000 is deducted from taxes, in case of very grave medical situations. Third, Section 80DDB covers 40,000 for specific diseases. Senior citizens receive 60,000 deductions under this section. Section 80U also covers for 50,000 for a disabled person, with an enhanced cover of 75,000.
India has Double Taxation Avoidance Agreements (DTAA) with over 79 nations. Under this, people are taxed with particular rates and norms in more than 1 country. Under the IT Act of ’61, there are 2 sections to save oneself from Double Taxation – Section 90 and Section 91. Section 90 is for people who have paid their taxes in a country, which has signed the DTAA with India. Section 91 covers for those people who have paid taxes in a country which has not signed the DTAA with India. So, people falling under both sections can be eligible for tax deductions.
6) Interest on Higher Education –
Section 80E covers tax deductions on interest on higher education. These deductions are for individual only and not for Hindu Undivided Family. There is no limit for the amount to be deducted for tax. The only area, though, covered by this section is the interest paid and not the principal for higher studies. Deductions are eligible only if interest is paid from chargeable income. Moreover, deductions are covered only when loans are taken from reputed financial institutions or banks and not from relatives.
Per Diems refer to that money, which is given by a firm to its employee for daily spending, connected with work travel, food and living. This is usually given when an employee goes abroad for company tasks. A lump sum amount is given to the employee and the period is about 3 months. It is not taxable, either in India or abroad. The only condition to be fulfilled here is that the entire Diem should be spent; else the remaining amount will get taxed. Moreover, not disclosing this amount is considered illegal and is punishable. Per Diems are exempted from tax under Section 10(14)(i), with Rule 2BB(1)(b) of the IT Act.
8) Tuition Fee of Children –
This is perhaps the one deduction, which most people forget to claim. This is given only to individuals and not Hindu Undivided Family. This deduction is given for 2 children only. If the assessee has more than 2 kids, then he/ she can decide for which 2 kids’ fees to be deducted for tax. If both husband and wife work, then each of them is eligible for getting tax exemption for 2 children. Sections 80C, 80CCC and 80CCD provide a deduction of maximum 1,00,000 and not more. Only full-time courses are covered under this and not part-time ones. Assessee or his/ her spouse is not eligible for this tax exemption. Private tuition fees are not covered here. Exemption is given for recognized schools, colleges and universities only.
Profit gained on the sale of property is exempted from tax. Long-term (3 years and above) capital profits, including – equities, buildings, houses, bank deposit and real estate, are not taxable, only if they are sold by a recognized stock exchange and Securities Transaction Tax (STT). This is covered under Section 54 of the IT Act. This section covers only individuals and not Hindu Undivided Family. Only residential houses and apartments are exempted from tax and not commercial ones.
10) Repairs and Maintenance of Houses –
Section 80C does not provide for exemptions of the principal amount meant for reconstructions, repairs and renewals of houses. This section allows only for buying or constructing a new home. Repairs and maintenance of houses and homes are also exempted from taxes. Section 24(b) of the IT Act covers Home Loans for the reconstruction, renewal and repair of existing houses. A maximum of 30,000 worth of tax deduction is allowed through this section. This deduction is meant for residential abodes only.
1) Deductions for Charity –
Tax deductions can be made on charitable deeds but these are operated only under certain categories. The 2 broad classifications of tax deductions for charity are – (A) and (B), both under the Section 80G of the IT Act, 1961. In category (A) – the total amount of money given in charity is deducted from the assessee's gross income. In category (B) – only half of the money donated is eligible for tax deductions. Category (A) is a better option for us to save more money. Areas under category (A) include - Prime Minister's National Relief Fund, Prime Minister's Armenia Earthquake Relief Fund, National Foundation for Communal Harmony, Maharashtra Chief Minister's Earthquake Relief Fund, National Illness Assistance Fund and others. Areas under category (B) include - Jawaharlal Nehru Memorial Fund, Prime Minister's Drought Relief Fund, Indira Gandhi Memorial Trust, Rajiv Gandhi Foundation, National Cultural Fund and others.2) Deductions on Medical Expenses –
Tax deductions are allowed for medical expenses, again within certain limits. Medical expenses are eligible for tax deductions under Section 80D. Mediclaims for certain diseases are also covered under Section 80DDB. A few special diseases covered under this act are – neurological diseases, malignant cancers, AIDS, chronic renal failure and hematological disorders. A maximum of 40,000 is deducted for regular people and 60,000 for senior citizens. Our family members are also eligible for this deduction, only if they are completely dependent on us. However, one would require a certificate (10- I) from specialist doctors for these deductions.3) Deductions on Rent Paid –
House Rent Allowance (HRA) are eligible for tax deductions. HRA is covered under Section 80GG of the IT Act. According to this, all people, both salaried and business people, are eligible for this. Deductions can be claimed for both, furnished and non-furnished houses. The details of this deduction are – minimum of 2,000 per month or 25 percent of one’s total income, the lesser amount being considered. Deductions are available for only those houses which are located in municipal areas, though most prominent cities are a part of these areas. This claim can be availed by filling out Form 10-BA.4) Disabled People –
There are 3 categories for availing tax deductions under disability. First, section 80DD provides a deduction of 50,000 for a disabled person undergoing medical treatment. Second, 75,000 is deducted from taxes, in case of very grave medical situations. Third, Section 80DDB covers 40,000 for specific diseases. Senior citizens receive 60,000 deductions under this section. Section 80U also covers for 50,000 for a disabled person, with an enhanced cover of 75,000. 5) Foreign Taxes –
India has Double Taxation Avoidance Agreements (DTAA) with over 79 nations. Under this, people are taxed with particular rates and norms in more than 1 country. Under the IT Act of ’61, there are 2 sections to save oneself from Double Taxation – Section 90 and Section 91. Section 90 is for people who have paid their taxes in a country, which has signed the DTAA with India. Section 91 covers for those people who have paid taxes in a country which has not signed the DTAA with India. So, people falling under both sections can be eligible for tax deductions.6) Interest on Higher Education –
Section 80E covers tax deductions on interest on higher education. These deductions are for individual only and not for Hindu Undivided Family. There is no limit for the amount to be deducted for tax. The only area, though, covered by this section is the interest paid and not the principal for higher studies. Deductions are eligible only if interest is paid from chargeable income. Moreover, deductions are covered only when loans are taken from reputed financial institutions or banks and not from relatives.7) Per Diems –
Per Diems refer to that money, which is given by a firm to its employee for daily spending, connected with work travel, food and living. This is usually given when an employee goes abroad for company tasks. A lump sum amount is given to the employee and the period is about 3 months. It is not taxable, either in India or abroad. The only condition to be fulfilled here is that the entire Diem should be spent; else the remaining amount will get taxed. Moreover, not disclosing this amount is considered illegal and is punishable. Per Diems are exempted from tax under Section 10(14)(i), with Rule 2BB(1)(b) of the IT Act. 8) Tuition Fee of Children –
This is perhaps the one deduction, which most people forget to claim. This is given only to individuals and not Hindu Undivided Family. This deduction is given for 2 children only. If the assessee has more than 2 kids, then he/ she can decide for which 2 kids’ fees to be deducted for tax. If both husband and wife work, then each of them is eligible for getting tax exemption for 2 children. Sections 80C, 80CCC and 80CCD provide a deduction of maximum 1,00,000 and not more. Only full-time courses are covered under this and not part-time ones. Assessee or his/ her spouse is not eligible for this tax exemption. Private tuition fees are not covered here. Exemption is given for recognized schools, colleges and universities only.9) Profit on Sale of Property –
Profit gained on the sale of property is exempted from tax. Long-term (3 years and above) capital profits, including – equities, buildings, houses, bank deposit and real estate, are not taxable, only if they are sold by a recognized stock exchange and Securities Transaction Tax (STT). This is covered under Section 54 of the IT Act. This section covers only individuals and not Hindu Undivided Family. Only residential houses and apartments are exempted from tax and not commercial ones.10) Repairs and Maintenance of Houses –
Section 80C does not provide for exemptions of the principal amount meant for reconstructions, repairs and renewals of houses. This section allows only for buying or constructing a new home. Repairs and maintenance of houses and homes are also exempted from taxes. Section 24(b) of the IT Act covers Home Loans for the reconstruction, renewal and repair of existing houses. A maximum of 30,000 worth of tax deduction is allowed through this section. This deduction is meant for residential abodes only.
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