Do Not Forget These Tax Breaks While Filing Your Income Tax Returns

It is important to pay the right amount of tax and file your returns on time. It is equally important to plan taxes efficiently so that the tax outgo is minimized. Let us look at the different tax breaks available so that you reduce tax burden in a legal way -

1) Capital Losses Incurred – If you make a loss on the sale of any of your assets such as real estate, shares or mutual funds etc. you can set it off against capital gains made in that financial year thereby reducing the taxable income. If you cannot write off the entire loss in one year, it can be carried forward and set off against capital gains for the next eight years.

2) Reinvestment of Long Term Capital Gains – The amount received on sale of a long term capital asset can be invested in real estate or bonds issued by REC or NHAI to get exemption from tax. This is proposed to change from the next assessment year.

3) Deduction for Interest paid on Education Loan -  Under Section 80E of the Income Tax Act, interest paid on an educational loan can be treated as a deduction. The loan can be taken for self, spouse or child. It can be taken by a legal guardian for a student. The loan should be for higher education. It can be claimed once repayment is started. It can be claimed for a maximum of 8 years. The loan has to be taken from a bank or a NBFC whose loan is eligible to qualify under Section 80E for tax deduction.

4) Tuition Fees Paid for Child – Deduction for Tuition fees is available up to a maximum of 2 children for each individual under Section 80C. A maximum up to Rs. 1,50,000 (maximum under Section 80C) is available for each financial year for each parent.

5) Income of Disabled Child - If you invest on behalf of your child, the income earned from these investments are clubbed with your income while computing taxes. But if the child is disabled, the income is exempted from being taxed.

6) Tax Breaks for certain diseases under Section 80DDB – If a person is suffering from any of the following specified diseases, he/she is eligible for tax deduction under Section 80DDB -

·       AIDS

·       Ataxia

·       Aphasia

·       Chorea

·       Chronic Renal failure

·       Dementia

·       Dystonia Musculorum Deformans

·       Hemophilia

·       Hemiballismus

·       Malignant cancers

·       Motor neuron disease

·       Parkinson’s disease

·       Thalassaemia

A person paying for treatment of any of these diseases for dependent parents, spouse or sibling is also eligible for deduction. A taxpayer can claim a tax deduction up to Rs 40,000. A senior citizen can claim deduction up to Rs 60,000 and a super senior citizen can claim up to Rs 80,000.

7) Deductions for disabilities under Section 80DD - A taxpayer who suffers from 40% disability can claim a deduction of up to Rs 75,000 under Section 80U. If the taxpayer is responsible for maintenance of another person who is disabled up to 40%, he is eligible for deduction of Rs 75,000 under Section 80DD. If the disability is more than 80%, the deduction is Rs 1,25,000.