Gain from Permitted Tax Strategies not Evasive Loopholes
Every year, when the time comes to file taxes, it’s an itchy interlude, when most of us are filled with anxiety about the deductions that are going to burn a hole in our pockets.
Here are five subtly obvious income tax saving tips for you:
#1: Gain from capital losses by balancing it off
Did you know you could balance short-term losses against long-term capital gains? Short-term capital losses such as that incurred from investing in stocks can be set against long-term capital gains like that gained from debt funds or sale property.
For instance, you've paid off the home loan and sold the property for a profit of Rs. 40 lakh. At 25%, the amount of tax payable is Rs 10 lakh. In the same year, however, if you have sold stocks at a short term loss of Rs. 4 lakh, then your taxable amount will be Rs. 36 lakh.
Proof Required - Ensure you keep the statement of your trading account, including the details of transactions for which you have incurred losses.
#2: Learn More to Save on Educational Expenses
Increasing the cost of education is a major concern for parents. In the case of education, the taxman is relatively favorable.
Under Section 80C and 80E, interest on educational loans for children as well as spouses (excluding relatives and siblings) is deductible from taxable income for the first eight years.
Proof Required – For claims on interest paid on education loans, you need to present your loan account statement as proof.
#3: Lighten the weight of medical expenses on illness of dependants
The taxman understands that in circumstances where a dependent is chronically ill, medical expenses can weigh down taxpayers. Therefore, under Section 80DDB, an annual deduction of INR 40,000 or INR 60,000 for senior citizen dependents can be claimed.
Deductions can be claimed on only certain diseases, some of which include, advanced stage of AIDS, hematological disorders such as hemophilia, neurological diseases such as Parkinson’s, dementia, chorea, and chronic kidney failure.
To be eligible for a claim, dependents (parents, children, spouses, and siblings) should not have claimed for deduction separately.
Proof Required – For claims on medical expenses on an illness, of dependants, you need a medical certificate and details of the illness from a certified medical professional in a government hospital.
#4: Politicians are not the only ones to gain – Benefit from deduction on political contributions and charitable donations
Being socially responsible and politically inclined seems to be the current trend. Whether you contribute to a recognized political party, volunteer to donate money to an NGO or charitable organization, you are eligible for a tax deduction.
Under Section 80GGC (80GGB for corporates), donations to registered political parties (excluding contributions to individual) or electoral trusts can be eligible for a deduction. A fascinating point to note is that there is no upper limit on the amount that can be claimed as a deduction.
Under Section 80G, 100% or 50% of your donation to a charitable organization and up to 10% of your income is eligible for deduction.
Proof Required – For claims on contributions to political parties, you need a stamped receipt from the party or trust. For claims on donations made to charitable organizations, a tax exemption certificate or receipt is required.
Remember: It’s not about avoiding taxes but the tax saving options which will help to reduce your tax liability.