Income Tax Returns (ITRs) deadline is nearing and many taxpayers are still anxious about what more deductions they can claim to reduce their net tax burden. Though many have already filed their ITRs this year, some still crave to know details of some lesser-known deductions that they can claim. Some of them include:
National Pension Scheme (NPS)
Apart from the ₹1.5 lakh deduction available under Section 80C of the Income Tax Act, 1961, you have the opportunity to claim an additional deduction of up to ₹50,000 for investing in the National Pension System (NPS) under Section 80CCD (1B) of the Act. This means that your total deduction for NPS investments can go up to ₹2 lakh.
Please note that the maximum amount eligible for tax deduction in NPS is ₹50,000 per year. Investing more than this amount will not entitle you to claim any additional tax deduction.
To avail of the tax deduction for your NPS investments, you will need to include a copy of your NPS contribution statement along with your income tax return. The tax deduction for NPS investments is an excellent way to save on taxes while securing your retirement. If you qualify, you must consider investing in this scheme.
Here are some additional key points about the tax benefits for NPS investments:
- The tax deduction is available to all taxpayers, regardless of their income level.
- The deduction applies to investments made in the Tier I account of the NPS.
- Both employer and employee contributions are eligible for the deduction.
- The deduction is applicable for the financial year in which the NPS investment is made.
Interest earned from money kept in savings accounts
Under the Income Tax Act, Section 80TTA offers taxpayers the opportunity to claim a deduction of up to ₹10,000 on the interest earned from their savings accounts each year.
This implies that if your interest earnings from savings accounts amount to ₹10,000 or less, you won't be liable to pay any tax on that income. However, if your interest earnings exceed ₹10,000, you will only be taxed on the amount that surpasses this limit.
To avail of this deduction, you will need to furnish your bank with a copy of your ITR form annually. The bank will then calculate the deduction amount you qualify for and adjust your tax liability accordingly.
Here are some important points to bear in mind regarding Section 80TTA:
- The deduction is exclusively applicable to interest earned from savings accounts held in banks, cooperative societies, or post offices.
- It is not available for interest earned from fixed deposits or other types of investments.
- Only taxpayers who are below the age of 60 are eligible to claim this deduction.
Deductions for interest paid on education loans sought
Section 80E of the Income Tax Act offers you the opportunity to avail a deduction on the interest paid towards an education loan taken for the higher education of your spouse, children, or a student for whom you are a legal guardian.
This deduction can be claimed for a maximum period of eight years, commencing from the year you begin repaying the loan. For instance, if you take an education loan in 2023 and commence paying the interest in 2024, you can claim the deduction for the interest paid in 2024, 2025, 2026, 2027, 2028, 2029, 2030, and 2031.
There is no specific limit on the amount of deduction you can claim. However, it's important to note that this deduction applies solely to the interest paid, and not towards the principal amount of the loan.
To claim the deduction, you must provide a certificate from the bank or financial institution that issued the loan, indicating the amount of interest you have paid during the relevant year. You can then claim the deduction when filing your income tax return.
Deductions on money doled out as charity
Contributions made to government-backed funds offer the advantage of a full deduction on your income tax. Donations to entities like the Prime Minister's Relief Fund, the Chief Minister's Relief Fund, and the National Illness Assistance Fund qualify for a 100 percent deduction. On the other hand, donations made to other charitable organisations are eligible for a 50 percent deduction only.
However, to avail of the deduction, it is essential to retain a receipt or any supporting documentation that displays the donation amount and the name of the fund to which you contributed. Subsequently, you can claim the deduction on your ITR filed.
Deduction on money spent on preventive health check-ups
Under Section 80D of the Income Tax Act, taxpayers have the opportunity to claim a deduction of up to ₹5,000 on the expenses incurred for preventive health check-ups for themselves, their spouse, dependent children, and parents aged below 60. However, for parents above the age of 60, the deduction limit is ₹7,000.
This implies that if you spend ₹5,000 or less on preventive health check-ups for you and your family members, you won't be required to pay any tax on that amount. If the expenses exceed ₹5,000, you will only be taxed on the amount exceeding this limit.
To claim this deduction, it is necessary to retain a receipt or any supporting documentation that indicates the cost of the preventive health check-ups. You can then claim the deduction while filing your income tax return.
Here are some essential points to consider regarding the preventive health check-up deduction under Section 80D:
- The deduction is solely applicable to preventive health check-ups and not for the treatment of any illness or medical condition.
- The check-ups must be conducted by a registered medical practitioner or a hospital.
- The purpose of the check-ups should be for early detection of diseases.
While many taxpayers are aware of the major deductions that can help reduce tax liability, these lesser-known deductions can help round up the tax liability to zero or help get a refund, if properly used.