The biggest ignorance amongst tax payers is that the only scope for saving tax is in the realm of the ever so popular Section 80C (i.e. Life Insurance, PF, Long term FDs, etc.) In today’s post, we look at some practical tax saving options outside the traditional 80C box.

1. Rent paid by self-employed persons (80GG)

This is a good option for persons who do not receive HRA as part of their salary structure and who live in a rented house. The deduction is the lowest of the following:

a) Rs. 5000 per month

b) 25% of total income

      c) Rent paid – 10% of income

There are a few conditions to be fulfilled in order to be eligible for this tax break:

• Deduction is only available to self-employed and salaried individuals.
• No deduction available if you have already received HRA.
• You or your spouse should not be the owner of a residential property in the city where you are presently working.

2. Interest on Higher education loan (80E)

One can claim deduction of interest paid on repayment of loan taken for higher education. Any course of study after passing senior secondary education qualifies as higher education. Whats more is that this deduction can be claimed not only for self, but also for spouse, child or relative (a student of whom you are a legal guardian).

 

3. Interest on loan for renovation of house (24b)

Sure you know about the deduction of interest paid on the loan you took for buy a new house. But did you know you could get a deduction of upto Rs. 30,000 for interest on loan taken for renovation of your old house? Yes it’s true. It may not be as lucrative as the Rs. 200,000 deduction for a new house, but something is better than nothing.

 

4. Charitable donations (80G)

If you are philanthropic at heart and often donate to charity, you can get a deduction of up to 100% of the amount paid for charity if the donee has an 80G certificate. On the receipt, look for text that reads something like – ‘All donations made to xxx are eligible for deduction under 80G of the Income Tax Act.’ Why not get tax benefits while also racking up on some good karma..!

 

5. Donation for scientific and rural development (80GGA)

This option is available to only those individual who have income from sources other than Business or Profession. Donations for scientific or rural are eligible for deduction from income. Cash donations are capped at a maximum Rs. 10,000 p.a. Any of the following can qualify as a deduction under this section-

 

• Sum paid to a research association which undertakes scientific research, or sum paid to a college, university or any other institution to be used for scientific research and these are all approved by the prescribed authority under section 35(1)(ii)
• Sum paid to a research association which undertakes research in social science or statistical research or sum paid to a college, university or any other institution to be used for the same purpose and these are all approved by the prescribed authority under section 35(1)(iii)
• Sum paid to approved association or institution which undertakes any program of rural development and is approved under section 35CCA
• Sum paid to an approved association or institution which undertakes trainings of persons for implementing programs of rural development
• Sum paid to a public sector company, local authority or an approved association or institution which carries out project or scheme approved under section 35AC.
• Sum paid to notified Rural Development Fund
• Sum paid to notified Fund for Afforestation
• Sum paid to notified National Poverty Eradication Fund

Do take advantage of the above rather lesser known tax saving options. If you need professional help in doing your taxes or tax planning, feel free to reach out to us here.