The deadline for filing income tax returns is August 31, and procrastinators are advised to hurry to do the needful to beat possible glitches thrown up in the last minute rush. Moreover, missing the deadline would mean a penalty of up to Rs 10,000. If you are looking to minimise your tax outgo for the last fiscal, here are 5 must dos:
Maximise your 80C contributions
Taxpayers can claim up to Rs 1.5 lakh in tax benefits against expenses like tuition fees, payments made against home loan principal as well as investments such as Public Provident Fund (PPF), National Savings Certificate, NPS, EPF, life insurance premium, tax-saving mutual funds (ELSS). If you are falling short of the above threshold, an easy fix is to open a PPF account or, if you already have one, just increase the amount parked in it.
After a gap of one year and a half, the PPF interest rate has again hit the sentimental mark of eight per cent. PPF falls under the EEE (exempt-exempt-exempt) category, which means there is tax deduction advantage under Section 80C at the time of investment and no tax is levied during accumulation and withdrawal.
While tax saving-funds, or ELSS, have delivered higher returns - 12 per cent over the past three years as on January 31, according to ValueResearch - it's best not to park money in this asset class in a hurry, without proper research. Also keep in mind that long-term capital gains (LTCG) tax applies to gains above Rs 1 lakh in a financial year.
Avail of Section 80D benefits
Every individual or Hindu Undivided Family can claim a deduction on payment of medical insurance premiums in a fiscal, which is over and above the benefits under Section 80C. According to Cleartax, an individual can claim a deduction of up to Rs 25,000 for the insurance of self, spouse, and dependent children. An additional deduction of up to Rs 25,000 is available for taking medical cover for your parents -- a higher deduction of Rs 50,000 if your parents are senior citizens.
For instance, if your age is 65 and your father is a nonagenarian, the maximum deduction you can claim under Section 80D is Rs 1 lakh. "From FY 2015-16 a cumulative additional deduction of Rs 5,000 is allowed for preventive health check," Cleartax added.
In addition, taxpayers should keep in mind that a deduction up to Rs 40,000 is available to a resident individual or a HUF with respect to any expense incurred towards treatment of specified medical diseases or ailments for himself or any of his dependents under Section 80DDB. In case the individual on behalf of whom such expenses are incurred is a senior citizen, maximum deduction limit is Rs 1 lakh.
Don't miscalculate tax benefits on home loan
Under Section 80EE you can claim a deduction of up to Rs 50,000 per fiscal on the interest portion of your residential house property loan availed from any financial institution. Remember that this amount is over and above the Rs 2 lakh limit under Section 24 of the Income Tax Act.
If a person has taken any loan for purchase, construction, repair, renovation etc. of a house property then the interest paid or payable on such loan is allowed to be reduced while computing the income from house property. The interest on housing loan is allowed without any limit in case of let-out and deemed let-out property. However, in the case of self-occupied property, a deduction for interest is allowed up to Rs 2 lakh if the loan is taken for purchase or construction of residential house property and it is completed within five years from the end of the financial year in which loan was taken. The processing fee paid can also be claimed as deduction under Section 24.
If a person has incurred loss from one house property then he is allowed to set-off such loss against income from any other house property. If income from other house properties is not sufficient then the unadjusted loss is allowed to be set-off from income chargeable under the head salary, business or profession, capital gain or other sources, subject to a limit of Rs 2 lakh. Any unclaimed losses can be carried forward to subsequent years which can be adjusted against future income from house property.
Deduct interest on savings accounts
Individual taxpayers as well as HUFs can claim a deduction of up to Rs 10,000 against interest income from any savings account with a bank, co-operative society, or post office. However, this Section 80TTA deduction is not available on interest income from fixed deposits, recurring deposits, or interest income from corporate bonds.
Understand Section 80GG
Most people think that you can only claim deduction for HRA only if it forms a part of their salary component. However, if you do not receive HRA from your employer but still make payments towards rent for any furnished or unfurnished accommodation occupied by you for your own residence, you can claim deduction under Section 80GG towards rent that you pay. However, in case you own any residential property at any place, for which your income from house property is calculated under applicable sections (as a self-occupied property), no deduction will be allowed under this section.