The last date for filing income tax return for the assessment year 2022-23 or financial year 2021-22, is approaching soon. An individual must file an income tax return or ITR if his or her total income exceeds the basic tax exemption limit in a financial year. Taxpayers have options to claim various deductions under the Income Tax Act, 1961, to lower their tax liabilities. While you must be aware of the popular deductions such as investments in Public Provident Fund or PPF under Section 80C, there are various other lesser-known income tax deductions available too.
Take a Look at the Lesser-Known Income Tax Deductions that You Can Avail
1) Income Tax Deductions for Contribution to Pension Funds
If an individual has contributed to any annuity plan of any insurance company in the financial year 2021-22, for receiving a pension, he or she can claim a deduction for the amount paid from the gross total income. Section 80 CCC allows the taxpayers to claim deductions of up to Rs 1.5 lakh for purchasing pension products. Both the resident and non-resident individuals paying to pension funds can claim this benefit.
Taxpayers can claim an additional benefits of 50,000 for their contributions to the National Pension Scheme (NPS) under Section 80CCD. Till 2015, taxpayers could claim the an income tax deduction of up to Rs 1 lakh against contributions made to the NPS. In Budget 2015, the central government increased the maximum amount allowed to be invested in NPS to Rs 1.5 lakh from Rs 1 lakh. A new sub-section 1B was also introduced to provide an additional deduction of up to Rs 50,000 for contributions made by any individual under NPS. So, now taxpayers can claim a total deduction of Rs 2 lakh (Rs 1.5 lakh under Section 80C and Rs 2 lakh under Section 80CCD) for investing in NPS.
2) Income Tax Deduction for Interest on Savings Account
Do you have multiple savings account? Then, you can claim a deduction of up to Rs 10,000 under Section 80TTA of the Income Tax Act, 1961, for the interest earned in a finacial year on the savings account. The deduction can be claimed for a) Savings bank accounts, b) Co-operative bank accounts, C) Post office savings schemes.
3) Section 80D: Deduction for Medical Insurance and Preventive Health Checkup
The demand for health insurance has accelerated sharply after Covid-19 pandemic. If you have purchased a medical insurance for yourself, partner or dependent children or parents, you will be eligible to claim a deduction on insurance premiums under Section 80D. Individuals can claim up to Rs 25,000 for payment of medical insurance premium for himself or herself, spouse or dependent children or parents. If the parents are senior citizens, a deduction of Rs 50,000 can be claimed in the financial year 2021-22.
Similarly, every individual is eligible to claim a maximum of Rs 5,000 in a financial year under Section 80D for payment of preventive health checkup of either himself or herself or family members which include parents and dependent children.
It must be noted that this tax deduction is available over and above the deduction of Rs 1.5 lakh under Section 80C.
4) Income Tax Deductions for Paying Rents to Parents
Taxpayers can avail house rent allowance (HRA) exemption, even if they pay rent to their parents under Section 10(13A). To claim this deduction, HRA must be a part of the salary package. The house rent allowance you will be entitled to will be the least of the following – a) The HRA amount received as salary, b) 50 per cent of the salary if rent a house in Delhi, Mumbai, Chennai or Kolkata. For those staying in a rented house in non-metro cities, the HRA will 40 per cent of the salary, c) Rent paid — 10 per cent of salary (basic component + dearness allowance). It must be noted that rent agreement and rent receipts are mandatory to claim this deduction. On the other hand, parents can deduct property taxes and claim standard deduction on the rental income.
5) Income Tax Deductions for Donations Under Section 80G
If taxpayers have donated during the financial year to any approved body or charitable organisation, an income tax deduction can be claimed on the amount paid. Contributions made through cheque, draft, or cash are eligible for this deduction. For donations above Rs 2,000, the taxpayers must use any other mode of payment apart from cash, to claim the deduction. There is no maximum limit for the deduction which can be claimed for donations made under Section 80G.
The donations are eligible for a 100 percent or 50 percent deduction with or without restriction. However, taxpayers should be aware that all non-government organisations (NGOs) or charitable institutions do not qualify as providing donors with a deduction under Section 80G.
Section 80 GGA allows individuals to claim deduction for the scientific research or rural development while Section 80GGB & Section 80GGC are for donations given to political parties.
6) Income Tax Deduction for Purchasing Electric Vehicle Under Section 80EEB
Introduced in Budget 2019, Section 80EEB allows a deduction for interest paid on loans for buying electric vehicles. A maximum deduction of up to Rs 1.5 lakh is available under Section 80EEB. Any interest payments above Rs 1,50,000 can be claimed as a business expense.