Yes, this is true. You can save tax on your expenses too. Every one of us is a victim of rising inflation in our country. High inflation has led to high-interest costs and thus effecting the loan EMIs, rising property prices results in high rentals, education costs, and medical costs inflation is also not hidden from anyone. All these expenses many times leave very little surplus to invest to save tax. Understanding all these concerns, the income tax law has some provisions where you can save tax on all these kinds of spending. Today we’ll have a look at all those expenses which in turn can save tax outgo.
Save tax on spending towards education (Section 80C
You can save tax u/s 80C on the tuition fee (which is a part of your child’s school fee) you pay towards your children’s education. This is available for a maximum of 2 children. This deduction is a part of Rs 1.5 lakh u/s 80c which also includes investments in insurance, ELSS, 5-year bank deposits, EPF, PPF, etc. This benefit is available only for the payment to recognized education institutes situated in India and does not include any private tuition, donation or development charges, transport charges, mess charges, hostel charges etc.
If you have taken an education loan for your child’s higher education or even for self or spouse’s higher education (any full-time course for graduation or post-graduation), then the complete interest amount that you pay towards that loan repayment can be claimed for tax deduction u/s 80E. Deduction is only available if the loan is taken from a financial institution and only for self or dependents (spouse or children)
Save tax on Spending on Housing (Section 80C, 24):
Spending towards the construction, buying or renovation of the house is also eligible for tax benefits, when it is done by taking a Loan. If you have taken a housing loan for constructing or buying a housing property then you can claim tax benefits u/s 80C and u/s 24 of the income tax act. Principal payment portion of loan EMIs get counted under section 80C upto a maximum limit of Rs 1.5 lakh and the interest portion counted u/s 24 upto a maximum limit of 2 lakhs for self-occupied house, but if the house is towards letting out then there’s no limit on interest payment benefit. To claim Section 80C benefit, loan has to be taken from a recognised financial institution but for section 24 benefit even loan from a relative will also do. Here you will find the benefit of having different tax files in the family, so they can lend to each other and claim the tax benefits without paying anything to the third party or institution. Read the series of articles on tax planning tips to develop the tax files.
If you Don’t have enough arrangements to buy or construct house and are living on rent, then don’t worry you can claim the rent paid towards your house against the Housing Rent allowance that you receive with your salary. But do remember that if you are paying more than Rs 1 lakh per annum then you need to have PAN no. of your landlord to claim tax benefit. ( read about housing rent allowance)
Save tax on expenses towards medical check-up and treatment (Section 80D
,80DD , 80DDB , 80U):
Medical costs are rising day by day. There are some provisions in income tax laws where you can claim tax deduction on the amount spent on medical treatment of self or dependents. These provisions come under section 80DD, 80DDB and Section 80U.
Section 80DD comes into the scene where the medical treatment was done for a handicapped dependent. There’s one condition on this that the disability should not be less than 40% and the person should be completely dependent on the taxpayer. There are some defined disabilities in this section for which you can claim tax benefits. Here you can claim a fixed deduction amount irrespective of what you’ve spent on medical treatment. The deduction would be as follows-
From FY 2015-16, for disability between 40% – 80% it is Rs 75,000/- and for more than 80% disability the deduction amount is Rs 1.25 lakh.
If the tax payer himself is disabled then the same deductions can be claimed by him/her under section 80U, but not when it is already being claimed by someone else.
Section 80DDB relates to the medical treatment of self or dependents (spouse, children or parents) for defined/specified chronic illnesses. Some of the illnesses are neurological diseases with minimum of 40% disability level, malignant cancers, chronic renal failure, Full Blown AIDS, blood disorders. The deduction available would be as follows:
Rs 40,000/- or amount actually spent on the treatment of person having age less than 65 years. And for persons greater than 65 years of age, the deduction amount increased to Rs 60000/- or actual spent. You cannot get this tax benefit if you have claimed the medical expenditure from any insurance company.
One new addition was announced in this section from FY 2015-16, in the form of Super Senior citizens i.e. people who are above 80 years of age. The deduction limit in their case has been announced as up to Rs 80000
From FY 2018-19 onwards, the limit for individuals and his dependents is 40,000 and for senior and Super senior citizens the limit is increased to 1,00,000.
But don’t worry if you have medical insurance, then also you can claim tax benefit u/s 80D on the health insurance premium paid. If you have got a preventive medical check up done for self or parents then that amount upto Rs 5000/- can also be claimed u/s 80D. The total amount which can be claimed u/s 80D (health insurance premium and preventive medical check-up cost) is Rs 25,000/- for (self and family), Rs 30,000/- ( for parents), and 50,000/- (for senior citizen parents).
Please note, if both the taxpayer and parents are senior citizens, then the deduction increases to 1,00,000.
Besides this, you can adjust the medical expenditure against the medical allowance that you receive along with your salary (upto Rs 15000/- per year) by showing the relevant bills
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