Few Minor Deductions

By | July 27, 2015

Few deductions related to specified illnesses to certain donations, that taxpayers unknowingly miss while filing the income tax return.

Most taxpayers are familiar with the tax deductions under Section 80C and 80D. But there are several other deductions that a taxpayer can avail. Home loan processing fee and other charges, Home loan customers are aware of the tax benefits on the loan interest and principal repayment. But even the processing fees qualifies for deduction under Section 24. The processing fees and other charges are considered as interest and can be claimed as a deduction. This includes the prepayment charges. Interest on personal loan for down payment Section 24 also includes the interest paid on any loan taken for the purchase, renovation or reconstruction of a house. Even interest paid on loans taken from friends or family members are eligible for deduction under Section 24. But the taxman may want to see a loan agreement and the interest earned by the lender will be taxed as his income.

Tax deduction for disabilities

If a taxpayer suffers from 40% disability (certified by a government hospital), he can claim deduction of Rs. 50,000 under Section 80U. For a disabled dependent, he can claim a deduction of Rs. 50,000 under Section 80DD. In both cases, if the disability is severe, the deduction is Rs. 1 lakh. This is a flat deduction and does not depend on actual amount spent. The disabled person should be dependent on the taxpayer for maintenance, and should not have claimed deduction for disability separately.

Clubbing income of disabled child

If you invest in the name of your spouse or minor child, the income from the investment will be clubbed with your income under Sec 64 and taxed accordingly. However, if the child is disabled, the income from investments made in his name will not be clubbed with the income of parents.

Deduction for specified illnesses

A deduction of up to Rs. 40,000 can be claimed if a taxpayer suffers from any ailment specified under Section 80DDB or has a dependent who is a patient. For senior citizens, the deduction is higher at Rs. 60,000. The diseases include certain neurological ailments, cancers, AIDS and haematological disorders. However, if the amount is reimbursed by the employer or insurance, the taxpayer is not eligible for deduction. If he gets partial reimbursement, the balance can be claimed as deduction.

Interest from savings accounts

The interest is fully taxable but there is a small window of exemption. Up to Rs. 10,000 interest earned on savings banks account is exempt under Sec 80TTA. Also, up to Rs. 3,500 interest from a post office savings account is exempt from tax under Sec tion 10(15)(i). If you hold a joint account, the exemption is higher by Rs. 7,000.

House rent exemption without HRA

If you pay house rent but cannot avail exemption because there is no HRA component in their salary income or they even don’t have salary income. Under Section 80GG, you can claim a deduction for the rent even if you don’t get HRA. However, the taxpayer should not be drawing any housing benefit. Nor should he or spouse or child be owning a house in the city where he stays. The exemption is limited to the least of the following: A) rent paid less 10% of total income; B) Rs. 2,000 a month; C) 25% of total income.

Adjusting losses against gains

If you lost money in stocks or on other investments during the previous financial year, you can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Short-term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains. How-ever, long term capital losses can only be set off against taxable long-term capital gains.

Long-term losses from stocks and equity funds cannot be adjusted against any gain.

Donations

Donations under Section 80G are generally not included in Forms 16. You will have to claim this deduction at the time of filing your return. Depending on the organization or fund you have donated to, you can claim a deduction in the range from 50-100% of the donated amount. But the deduction cannot be more than 10% of your gross total income.

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