Tuesday, 4 August 2020

You Can’t Simply Ignore These Least Known Income Tax Deductions

Updated: October 11, 2014 3:09 pm

Unlike the most familiar investments made in 80C, 80CCF, 80E, 80D and a host of various other sections of the Income Tax Act for the deductions, a few more investments are there which the common tax payers are substantially ignorant of. However, a few of them do not make any significant contributions towards the deductions in the income tax of the payers yet it is highly desirable to know about those least known yet financially significant provisions of the IT Act which can make the tax payers eligible for the much-needed income tax deductions:

  1. Contributions Made To Political Parties

Do you know that a democratic country like ours has more than 900 political parties registered with the Election Commission of India and making contribution of a certain amount to one or more of them, may give you the heavy tax deductions? Contribution of this type may give the tax payer 50 per cent to 100 per cent of the deductions under Section 80GGC for individuals and Section 80 GGB for corporate organisations. However, it is to be noted that one can only contribute 10 per cent of one’s gross total income to a political party. Donations made by an individual to certain funds and charitable institutions are also available for deduction in the income tax under Section 80G of the Income Tax Act of the Government of India. The quantity of deduction, however, is either 50 or 100 per cent of the donations made, depending upon the types of charity institutions and trust. However, there is no limitation over the amount of charity made. Only essential condition is that these donations must be made to the registered institutions.

  1. Capital Gains

It is a well-known fact that we need to pay taxes on capital gains of both the short term and long term period but what is amazing is that we are less aware of the fact that if we incur any capital losses the same can be offset and compensated. For example, if a tax payer gains Rs, 20 lakh from the sale of a house and at the same time incurs a huge loss of Rs 10 lakh from the sale of stocks, then it obviously means that the tax payer’s taxable income now would be only Rs 10 lakh, that is Rs 20 lakh minus 10 lakh. However, one must be careful of this fact that while short term losses can be balanced against both the short term and long term capital gains, the capital gains can only be balanced out against the long term capital gains.

  1. Looking After Your Dependants May Give You Tax Deductions

In case, the tax payer is looking after a dependant who is suffering from some chronic diseases then the Income Tax Department provides tax concessions. It is basically on the sympathy ground because the income tax department well understands the miserability of the tax payer when he or she spends huge sum of money on the treatment of the diseased dependant. The Income Tax Department gives a deduction of Rs 40,000 per year under Section 80DDB and this deduction increase to Rs 60,000 if the dependant happens to be a senior citizen. However, this deduction is permitted in case of an array of diseases like neurological diseases of dystonia musculorum deformans, aphasia and Parkinson’s disease, hemiballlismus, ataxia, motor neuron disease, haematological disorders, chronic kidney failure.

  1. Deduction for person with disability

An individual with some disabilities, which are certified by a prescribed medical authority, either a civil surgeon or chief medical officer of a government hospital, becomes eligible for the tax deduction under the Section 80 U of the Income Tax Department. Under this section a fixed deduction of Rs.50, 000 is available for the tax deduction to the individual tax payers with 40 per cent disability and Rs. 100,000 to the individual tax payers who are suffering from severe disability condition that is 80 per cent disability. The types of disability may include inter-alia blindness, low vision, hearing impairment, locomotor disability, mental retardation and other types of mental illness.

  1. Payment of Higher Education And Vocational Course Loan Interest

Interest paid on the loans taken for higher education or vocational studies qualifies for the deduction under the Section 80E of the Income Tax Act. This deduction is also available on the interest paid on the loans for the higher studies or vocation education of the children or spouse of the individual tax payers. This type of deduction is permissible on the basis of actual payments of interests paid on the loans taken. That is why an individual tax payer is entitled to get deduction on the interest paid even for the earlier years in a particular year. Arrears of interest paid, too, can give one income tax deduction. But this deduction is allowed only for those loans which are taken from any financial institutions including cooperative banks or any approved charitable institutions. Loans taken from relatives, friends or any other non-formal sector sources are not eligible for tax deductions.

By Shreeprakash Sharma

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