KNOWLEDGE CENTRE Tax Planning / The Things You Should Tell Your Tax Planner About

The Things You Should Tell Your Tax Planner About

Like most other taxpayers, you may only know about tax benefits available on investments made under section 80C of the Income Tax Act, 1961. However, the Income Tax Act offers many other deductions under other sections that are used to reduce your tax liability.

Which Investments Should You Declare To Get Tax Exemptions?

1. Savings account interest

You are eligible to claim tax deductions on the interest earned on your savings bank account. The maximum amount of such deduction is limited to INR 10,000 per annum. You must show the interest under the heading ’income from other sources’ when you file your tax returns and then claim deduction under section 80TTA of the Income Tax Act.

2. Premium for health cover

An amount of up to INR 25,000 paid towards premium for health coverage for self, spouse, and children are eligible for tax deduction under section 80D of the Income Tax Act. If you are a senior citizen (age exceeding 60 years), the maximum deduction increases to INR 30,000. To claim this deduction, you need to purchase health insurance from a registered insurance company in any mode other than cash. Additionally, you may claim a deduction for an amount of INR 5,000 paid for any preventive checkups for self, spouse, and children. Furthermore, treatment expenses or rehabilitation of handicapped dependents may be claimed as a deduction for an amount of INR 75,000 as per section 80DD of the Income Tax Act. However, this deduction increases to INR 1,25,000 in case of any severe disability.

3. Education loan

Do you want to know how to save tax on an education loan? If you have availed of an education loan to pursue higher studies, the interest on the same is eligible for tax deductions under section 80E of the Income Tax Act. This deduction is applicable even for loans taken to fund the education of your spouse and children. The tax benefit is available only in the interest amount for eight consecutive years beginning from the year of first interest payment. However, this deduction is available only to individuals and not Hindu Undivided Family (HUF) taxpayers.

4. Royalty paid to authors

Another helpful tax-planning tip, which you could follow, is if you are an author for books other than school and college textbooks and receive a royalty. Section 80QQB of the Income Tax Act allows you a tax deduction of up to INR 3 lakh for an amount received as a lump sum royalty. However, if the royalty is not received as a single lump sum amount, 15% of the book’s annual revenue is eligible for tax deductions.

5. Royalty income through patents

If you are a patentee, and have registered a patent post-April 2003, you may claim tax benefits on the royalty under section 80RRB of the Income Tax Act. The maximum amount of this deduction is INR 3 lakh.

6. Home loan interest

You may know how to save tax on your home loan. However, you may not know about the tax benefits available for the home loan interest. Section 24 of Income Tax Act provides benefits of up to INR 2 lakh paid as interest on a loan availed for a self-occupied home. However, if the property is under construction or you still have not received possession, this deduction is not available.

An additional deduction under section 80EE for interest payment on a home loan for up to INR 50,000 is available. However, you must have availed this loan during the financial year. Furthermore, the loan amount must not exceed INR 35 lakh and the property must be less than INR 50 lakh.

7. How can you invest in tax saving mutual funds?

If you do not have the expertise, you may seek the advice of a professional tax planner. In addition to providing you with the best tips, he will recommend the best tax saving mutual funds and other financial products. These types of mutual funds are often equity funds and are known as Equity-Linked Savings Schemes (ELSS). Such funds invest a majority of the corpus in equities and related products. The principal, dividend, and maturity proceeds are tax exempt when you invest in ELSS funds. The maximum amount of deduction is restricted to INR 1.5 lakh per annum under section 80C of the Income Tax Act.

However, to avail of these benefits, you must remain invested during the three-year lock-in period of these tax saving mutual funds. How do you choose among a large number of available options?

Simply download the Angel Bee mobile app and experience the power of the ARQ investment engine. ARQ analyzes over a billion data points to match mutual fund recommendations with your risk profile and investment goals.

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