Monday, 3 August 2015

few lesser known TAX DEDUCTION before filing your tax return

Home loan charges &fee
People are well aware about home loan interest and principal repayment but lesser know fact is even processing fee qualifies for deduction under section 24. The processing fee  and other charges  can be treated as interest and claimed as deduction under section 24.

Interest on personal loan
Section 24 coves not jest  interest on home loan, it covers any loan taken for the renovation or reconstruction of a home. It also covers loan taken from friends and family member. Assess should furnish loan agreement between two parties and the interest earned by the lender will be taxed as his income.

Tax deduction for disabilities
If a taxpayer suffers from 40% disability (as certified by a government hospital), he can claim deduction of Rs 50,000 under Sec 80U. For a disabled dependent, he can claim a deduction of Rs 50,000 under Sec 80DD. In both cases, if the disability is severe (80% or above), the deduction is Rs 1 lakh.
This is a flat deduction and does not depend on actual amount spent. However, the disabled person should be wholly or mainly dependent on the taxpayer for maintenance, and should not have claimed deduction for disability under Section 80U separately.

Clubbing income of disabled child
If you invest in the name of your spouse or minor child, the income from the investment will be clubbed with your income under Sec 64 and taxed accordingly. However, if the child is disabled, the income from investments made in his name will not be clubbed with the income of parents. Parents can use this provision to invest in taxable instruments like fixed deposits and debt funds.

Deduction for specified illnesses
A deduction of up to Rs 40,000 can be claimed if a taxpayer suffers from any ailment specified under Sec 80DDB or has a dependent who is a patient. For senior citizens, the deduction is higher at Rs 60,000. The diseases include certain neurological ailments, cancers, AIDS, kidney failure and haematological disorders.
However, if the amount spent is reimbursed by the employer or insurance, the taxpayer is not eligible for deduction. If he gets partial reimbursement of the expenses, the balance can be claimed as deduction.

Interest from savings accounts
The interest you earn is fully taxable but there is a small window of exemption. Up to Rs 10,000 interest earned on savings banks account is exempt under Sec 80TTA. Also, up to Rs 3,500 interest from a post office savings account is exempt from tax under Sec 10(15)(i). If you hold a joint account, the exemption is higher at Rs 7,000. "Since both provisions are separate, one can claim the benefits under both sections," says Suresh Surana, Founder, RSM Astute Consulting.

House rent exemption without HRA
Many pay house rent but cannot avail exemption because there is no HRA component in their salary. Under Sec 80GG, you can claim a deduction for the rent even if you don't get HRA. However, the taxpayer should not be drawing any housing benefit.
Nor should he or spouse or child be owning a house in the city where he stays. The exemption is limited to the least of the following: rent paid less 10% of total income; or Rs 2,000 a month; or 25% of total income.

Adjusting losses against gains
If you lost money in stocks or on other investments during the previous financial year, there is a silver lining. You can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Short term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains.
However, long term capital losses can only be set off against taxable long-term capital gains. Long-term losses from stocks and equity funds cannot be adjusted against any gain.

Section 80G donations
Donations under Sec 80G are generally not included in Forms 16. "The CBDT circular on TDS does not clarify as to whether deduction under Sec 80G needs to be considered by employers," says Surana.
You will have to claim this deduction at the time of filing your return. Depending on the organisation or fund you have contributed to, you can claim a deduction of 50-100% of the donated amount. But the deduction cannot be more than 10% of your gross total income.


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