10 lesser known Income Tax Deductions

We all know about the popularly know deductions like deduction u/s. 80C & 80D. But many times we use to forget to claim many other deductions which are available under the Income Tax Act, which can reduce our tax burden significantly. In this article we discussed 10 such lesser know deductions which taxpayers tend to forget to claim while filing there Income Tax Return.

We all know about the popularly know deductions like deduction u/s. 80C & 80D. But many times we use to forget to claim many other deductions which are available under the Income Tax Act, which can reduce our tax burden significantly. In this article we discussed 10 such lesser know deductions which taxpayers tend to forget to claim while filing there Income Tax Return.

1. Set off of Capital Loss Against Capital Gain

While most of us know that we need to pay taxes on short term or long term capital gains, not many are aware of the fact that capital losses, if any, can be balanced off against gains. So, for instance, if you have made a long-term capital gain of Rs 15 lakh by selling off your property and long-term capital loss of Rs 3 lakh by selling stocks which are either not listed or are sold off market  , the total taxable amount would Rs 12 lakh.

Please note Capital Gain on Sale of Shares sold through Stock Exchange can not be set off against other capital gain as profit from sale of shares of listed companies through stock exchange in exempt.

It is important to note that short term losses can be balanced off against both short term as well as long term capital gains. However, long term capital losses can only be balanced off against long term capital gains.

Read more – Carry Forward and Set Off of Losses – Income Tax

2. Deductions under section 80GG in respect of rent paid

Deduction to the extent of Rs 5,000 per month or 25 per cent of total income or actual rent paid in excess 10 percent of total income (whichever is less) is available under Section 80GG of the I-T Act in respect of rent paid by an individual on his accommodation, provided the individual does not get any house rent allowance.

Read More on this – Section 80GG Deductions – For rent paid

3. Medical treatment of specified ailments under section 80DDB

Deductions of expenses on medical treatment of specified ailments (such as AIDS, cancer and neurological diseases) can be claimed under Section 80DDB. The maximum amount of deduction allowed from gross total income is restricted to Rs 40,000. However for senior citizen the maximum amount of deduction till A.Y 2018-19 is Rs 60,000 and this limit has been increased to Rs 1,00,000 from A.Y 2019-20. In case of super senior citizen the maximum amount of deduction for A.Y 2016-17 to A.y 2018-19 is Rs 80,000 and it has been increased to Rs 1,00,000 from A.y 2019-20 on condition that no medical reimbursement is received from any insurance company or employer for this amount.

In order to claim this deduction, however, you will have to submit Form 10-1 from a specialist doctor working in a government hospital in India, confirming the treatment of the disease.

Read More on section 80DDBDeduction under section 80DDB with FAQ

4. Deduction under section 80U for Person with disability

Under Section 80U of the Act, an individual who is certified by the prescribed medical authority to be a person with disability shall be allowed a deduction of Rs 50,000 (Rs 75,000 from A.Y 2016-17) and an individual, who is certified as a person with severe disability, shall be allowed a deduction of Rs 1,00,000 (Rs 1,25,000 from A.Y 2016-17)

Read More on Deduction Under Section 80U – Deduction U/s. 80U for disabled persons

5. Charitable deductions under section 80G

Deduction is also available under Section 80G of the I-T Act in respect of donations made by an individual to certain funds, charitable institutions and so on. There is no restriction on the amount of charity.  The rate of deduction, however, is either 50 or 100 per cent, depending on the choice of trust. Also, donations must be made to registered institutions only.This includes any amount contributed (other than cash contribution) to a recognised political party. It can be claimed as a deduction under Section 80GGC (80GGB for corporates). This is a new deduction and was introduced in April 2010.   Donations to institutions involved in scientific research or rural development get exemption under Section 80GGA(cash contribution in excess of Rs 10,000 shall not be allowed as deduction).  The donation can also be made to an electoral trust that works for conducting elections. Interestingly, unlike other deductions, there is no ceiling on the amount that can be claimed as deduction.Donation can be made in cash or cheque. However no deduction is allowed under section 80G in respect of cash donation in excess of Rs 10000 from A.y 2013-14 to A.y 2017-18 and Rs2000 from A.y 2018-19 onwards . The deduction is available only if the sum goes into the party coffers. The quantum of deduction depends on the nature of the organisation. For instance, money given to certain establishments, such as the National Defence Fund, the Prime Minister’s National Relief Fund and the Chief Minister’s Relief Fund enjoy 100% deduction.On the other hand, NGOs such as Child Rights and You, Helpage India and the National Children’s Fund give you only 50% deduction. So, it’s a good idea to find out how much deduction is available before you write out a cheque. However, you cannot use this route to evade tax by bringing down your income tax slab. There is a ceiling on the deduction a taxpayer can claim in a year. The quantum of deduction is limited to 10% of the gross total income of the donor. Also, only cash donations are taken into account. Donations of food, clothes and medicines do not qualify for such a deduction.

Read more on Deduction Under Section 80G – Deduction U/s. 80G of Income Tax Act, 1961 for donation

6. Interest on loan taken for higher education & vocational courses 

Taxpayers also tend to forget that the interest paid on an education loan taken for higher studies or vocational curses qualifies for deduction under Section 80E of the I-T Act. Also, effective April 1, 2008, the said deduction is also available where the loan is taken for the purpose of higher education of spouse or children of the individual or the student for whom the individual is a legal guardian. Thus, if you have taken a loan for higher education, don’t forget to make your claim. Also remember that the deduction benefit on interest is allowed for maximum eight years, or till the interest is fully paid.

Read more on Deduction Under Section 80E – Education Loan – The Mantra to Save Tax under section 80E

7. Interest paid on a second home loan is fully deductible

The tax benefits of a home loan are well known. Under Section 24b, one can claim a deduction of up to Rs 2 lakh a year for the interest paid. If the taxpayer buys a second house through another home loan and gives it on rent, the entire interest paid on the home loan during a given year can be claimed as deduction.  If you have more than one house, any one is deemed to be rented out. So the interest income on the home loan for that house can be claimed entirely for deduction, provided the rental income or deemed income is taxable.

Taxability of second House under Income Tax Act,1961

8. HRA as well as home loan benefits

If you took a home loan and are still living in a rented place, you will be entitled to:

1. Tax benefit on principal repayment under Section 80C

2. Tax benefit on interest payment under Section 24

3. HRA benefit

Of course, you can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete, the HRA benefit stops. If you took a home loan, got possession of the house, have rented it out and stay in a rented accommodation, you will be entitled to all the three benefits mentioned above. However, in this case, the rent you receive would be considered as your taxable income.

House Rent Allowance (HRA) Taxability & calculation

9. Save tax through your family

Simplest way of saving tax is by investing through parents, parent in laws, wife and children. If you invest in the right instrument, the rate of return may be higher as well. Here is how we can save tax through our family members. Read Following Post for more details :- Tax Planning- Save tax through your family

10. Repairs and maintenance of house property  

You will never forget to claim deduction of interest on repayment of your home loan, but not many people know that any interest paid on home loan for reconstruction or repair of the “house property” qualifies for deduction of up to 30,000, subject to the overall limit of 2,00,000. – Also Read- All about Income from House Properties

(Republished with amendments)

Categories: Income Tax

View Comments (53)

  • I booked a flat in a project in mid 2009. In April 2010, home loan EMI started. The project got delayed and it is complete now, August 2016. I havn’t taken the home loan benefits till date, neither on principal, nor interest. Please advice, how can I avail tax break on home loan. Also, is it good to close the loan account now, since I got some money to do it ? If I close the loan now, can I still get the home loan benefits, if any ?

  • I have spent Rs. 300000 (three lac for repair and maintenance of my residential building during 8/16. Whether i am eligible for any kind of exemption while calculating income tax for 2016-17

    • For repair & Maint. if you have taken any loan then intt. paid on such loan is allowed. For normal repair & maint., Govt. has already given a standard deduction of 30%

  • While working out Long term Capital Gains tax on sale of house , can we consider monthly maintenance charges paid to society, yearly property taxes paid be considered as part of the expenses

    • Generally cost of Improvement can be considered while working out LTCG. For monthly repair & maint. govt. has already provided the standard deduction of 30%. Moreover, in case of self occupied property there is no tax. So it would be a highly debatable to consider monthly expenses while calculating LTCG.

  • How to cliam rebate of gift amount 150000 given to my parents, under which section i need to file itr, and where to give in declaration?.

  • Hi Mr. Kanoi,

    WRT your mail Para 7, deduction on second home loan interest is restricted to Rs.2.00 Lacs only.

    Kindly recheck and confirm.

    Thanks & regards,

    • Yes but loss allowed would be restricted to Rs. 2,00,000 in the same financial year in all cases whether let out or self occupied. Balance can be carried forward and can be set off from next year house property income.

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