While salaried individuals often concentrate on well-known tax deductions, understanding and utilising lesser-known deductions can significantly reduce their tax liability and increase their tax savings. By familiarising themselves with these deductions and keeping proper documentation, individuals can maximise their tax benefits. It is advisable to consult a tax professional or refer to the official guidelines provided by the Income Tax Department to ensure accurate understanding and compliance with applicable tax laws. Her Circle speaks to Chartered Accountant Abhay Asknani to shed light on lesser-known tax deductions, helping individuals maximise their tax savings.
Home loan from friends/relatives
Abhay says that while most individuals are aware of tax benefits associated with home loans from banks and financial institutions, they often overlook the fact that even loans taken from friends or relatives for purchasing or constructing a house are eligible for tax deductions. “Under Section 24 of the Income Tax Act, individuals can claim deductions on the interest paid on such loans, subject to certain conditions,” he adds.
Exemption on medical bills of uninsured parents
Medical expenses can be a significant financial burden, especially for uninsured parents. So Abhay suggests that salaried individuals can claim a deduction for medical expenses incurred on the treatment of their parents, even if they are not covered under any health insurance policy, under Section 80D of the Income Tax Act. The deduction can be claimed up to a maximum limit of ₹50,000 per financial year.
Preventive health check-up
To encourage individuals to prioritise preventive healthcare, the Income Tax Act allows “deduction under Section 80D of the Act, wherein, individuals can claim a deduction of up to ₹5,000 for preventive health check-ups for themselves, their spouse, children and parents,” says Abhay.
Deduction of dependent suffers ailments
If an individual has a dependent who suffers from a specified ailment, they can claim a deduction for expenses incurred on medical treatment and insurance for the dependent under Section 80DD of the Income Tax Act. Abhay says, “The maximum deduction allowed is ₹75,000 for normal ailments and ₹1.25 lakh for severe ones.”
Deduction on rent paid
While salaried individuals often claim the HRA deduction, Abhay speaks about Section 80GG of the Income Tax Act, wherein those who do not receive HRA can still claim a deduction for the rent paid under. “This deduction is available for individuals who live in rented accommodation and do not receive HRA or any other housing benefit. The deduction is subject to certain conditions and has a maximum limit of ₹5,000 per month or 25 per cent of the total income, whichever is lower,” he adds.
Deduction for taxpayers with disability
Taxpayers who have a disability can claim deductions under Section 80U of the Income Tax Act. The deduction amount depends on the severity of the disability. Abhay says “Individuals with a disability of at least 40 per cent can claim a fixed deduction of ₹75,000, while those with severe disability (80 per cent or more) can claim a higher deduction of ₹1.25 lakh.”
Deduction on NPS account
Individuals contributing to the National Pension Scheme (NPS) can claim an additional deduction under Section 80CCD(1B) of the Income Tax Act. “This deduction is over and above the deduction available under Section 80C. Taxpayers can claim a deduction of up to ₹50,000 per year for their contributions to the NPS account,” adds Abhay.
Joint home loan borrowers
Abhay talks about how a joint home loan with a spouse, sibling or any other individual is eligible for tax deductions. “All co-borrowers can individually claim tax deductions on the principal and interest repaid, subject to certain conditions. Each co-borrower can claim deductions in proportion to their share in the loan,” he adds.
Hindu Undivided Family (HUF)
Under section 2(31) of the Income-tax Act, 1961, The Hindu Undivided Family (HUF) is recognised as a legal entity, operates independently and has its own Permanent Account Number (PAN), enabling it to file tax returns separately from its members. The HUF comprises all individuals who are direct descendants of a common ancestor, including the wives and daughters of the male descendants. Abhay says, “HUFs can avail themselves of various tax deductions similar to individuals, such as deductions on home loan interest, health insurance premiums, and contributions to the NPS.”
Donations to charitable organisations or NGOs
According to Abhay, “contributions made to eligible charitable organisations or NGOs can be claimed as deductions under Section 80G of the Income Tax Act.” The deduction depends on the nature of the organisation and can range from 50 to 100 per cent of the donated amount.
Capital losses
While many individuals focus on capital gains and the associated tax implications, it is essential to remember that capital losses can also be utilised to offset gains. Abhay says, “If an individual incurs a loss from the sale of certain assets, such as stocks or mutual funds, the loss can be offset against capital gains. Any remaining losses can be carried forward to future years to offset against capital gains.”
