Most taxpayers are aware of the deductions available under Section 80C. the tax benefits of medical insurance and the advantages of a home loan. But there are also some inconspicuous sections of the Income Tax Act, which offer further savings to taxpayers. If you satisfy certain conditions, you can use these to bring down your tax liability.
The problem is that many tax filing portals don't give the taxpayer the option to claim these deductions. If the portal does not ask the relevant questions, you forego your right to claim these benefits. Admittedly, some of these deductions are available only in extraordinary circumstances. Even so, find out if you are eligible and how you should go about claiming them.
Gain from losses in stocks
Believe it or not, the losses you made in stocks this year can bring down your tax. If you have made any long-term capital gains from the sale of property, gold or debt funds, you can set them off against short-term capital losses in stocks and reduce your tax liability. The short-term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains. This can be especially useful for someone who has booked profits in gold ETFs and physical gold this year.
Suppose you made a long-term capital gain of Rs 6 lakh by selling gold ETFs. The tax payable on this amount is Rs 60,000. If, on the other hand, you sold some stocks within a year of buying and made a short-term loss of Rs 3 lakh, you can set this off against the gains from gold ETFs. So the gain from gold will be reduced to only Rs 3 lakh and the payable tax will be Rs 30,000.
The losses that have not been adjusted can be carried forward for up to eight years. Besides, only short-term capital losses from stocks can be adjusted against other gains or carried forward. So, the stocks you bought more than a year ago will not be eligible.
Rent is deductible even if you don't get HRA
In metros and large cities, house rent can account for as much as 40-50% of the total household expense. This is the reason that house rent allowance (HRA) for salaried individuals is exempt from tax to a certain limit. But what if your salary does not include an HRA component or you are a self-employed professional or businessman? Under Section 80GG, you can claim deduction for the rent paid even if
you don't get HRA. Not many people are aware of this deduction.
However, there are stiff conditions to be met. The least of the following three can be claimed as deduction: rent paid, less 10% of total income; or Rs 2,000 a month; or 25% of the total income. Also, the taxpayer should not be drawing any HRA or any other housing-related benefit.
Besides, he or his spouse or minor child should not own a house in the city where he lives and he should not claim tax benefits for some other self-occupied house. If you satisfy these conditions, you can avail of the tax benefit. Though you cannot claim more than Rs 2,000 as deduction per month, it can bring down your tax by Rs 7,400 a year in the highest tax bracket.
Certain diseases get tax benefits
The treatment of a chronic illness can be a drain on the finances of a taxpayer. This is why the Income Tax Act allows a deduction of Rs 40,000 if one has a dependant who suffers from any of the ailments specified under Section 80DDB. The deduction is higher at Rs 60,000 if the patient is a senior citizen.
The illnesses include neurological diseases (dementia, dystonia musculorum deformans, motor neuron disease, ataxia. chorea, hemiballismus, aphasia and Parkinson's disease), malignant cancers, full-blown AIDS, chronic kidney failure and haematological disorders (haemophilia and thalassaemia).
Dependants can include spouse, children, parents and siblings. However, there are a few conditions. The patient should be wholly or mainly dependent on the taxpayer and should not have a separately claimed deduction for the disability. If the amount spent is reimbursed by the employer or an insurance company, there is no deduction. If the taxpayer gets a partial reimbursement for the expenses, the balance can be claimed as deduction.
Disabilities also eligible for deduction
If you suffer from a disability, you can claim a deduction of Rs 75,000 under Section 80U. If you have a disabled dependant, you can claim Rs 50,000 under Section 80DD. Disability includes blindness. low vision, leprosy, hearing impairment. loco-motor disability, mental retardation and mental illness.
The deduction is available only if the impairment is at least 40%. If the disability is severe (80% or above), the deduction is Rs 1 lakh a year. The dependant could include spouse, children, parents and siblings. Incidentally, the deduction is offered as a lump sum and does not depend on the actual amount that the taxpayer may spend on himself or on the disabled dependant.